Top EM debt manager sees fantastic opportunities in post-Castro Cuba

Europe's most consistent emerging bond manager, Sydinvest's Phillip Blackwood, has been buying bonds from Cuba and thinks the country offers 'massive potential'. Meanwhile he singles out Venezuela and Nigeria as other key plays.

Blackwood has gone off his benchmark to hold US dollar denominated debt from Cuba in his portfolio. He thinks with a long term view investments in the currently socialist country will pay off.

'Cuba is an area which we are very positive on,' he says. 'It is a patience trade, it's not one that will go crazy in the near term, but we believe it will pay off in the medium term. It has massive potential; with the change in leadership we expect it to soften up and the US to gradually remove sanctions, which will open up fantastic investment opportunities.’

‘But it depends on when Cuba's leadership uncertainties are resolved. After that I expect to see an easing of tensions and a willingness to negotiate.' Blackwood says. 'We don’t expect a dramatic move, we expect things to go slowly.’

Another socialist country which is an important play for Blackwood is Venezuela, which continues to benefit from a high oil price.

'We believe the market has overreacted in terms of the widening spread,’ he says. 'Venezuela has no problems paying the debt with the high oil prices so why would they default? It would simply cost them too much economically to default. If they defaulted investors would go after their international cash flows; their oil money.'

He also continues to be postive about investing in Nigeria.

‘Nigeria is an oil story, but it's an oil story where production is set to increase,’ he says. He thinks that despite question marks over corruption and how democratic the government is, the reforms being introduced are encouraging.

'We are seeing some very positic economic policies getting put in place,' Blackwood says. 'It is a reform minded government.'

However, he has changed his exposure to Nigeria to shorter duration bonds as he is cautious about interest rates because of inflationary risks.

Citywire last week named Blackwood Europe's most consistent emerging market bonds manager because he is the only one who has beaten the sector's average manager for each of the last five years.

He only invests in sovereign debt, avoiding corporates, and puts his performance down to having faith in his process and standing by his investments.