The world has been “target rich” for Eaton Vance Management’sGlobal Macro Absolute Return Strategy.“We’re not afraid to go places that aresomewhat off the radar,” according portfolio manager John Baur. The portfolio’s investment strategy boils down to“country picking,” Baur adds. The $6.5billion fund returned 9.8% with a standard deviation of 2.4%in 2019, thankslargely to betting on positive growth inUkraine, as well as having effective longer-term strategies in Egypt and Serbia.
While these are some highlights of thestrategy last year, the portfolio generallyhas 60–70 global positions in sovereigndebt. These holdings vary throughoutthe credit spectrum, and they includecurrencies and commodities. Baur hasco-managed the portfolio with MichaelCirami for the past 12 years. Eric Steincame on board to help lead it in 2010.
Using fundamental research, theportfolio team diligently reviews theeconomic situation of each country, “butpolitics is something that we also spenda lot of time on,” according to Baur.
In Ukraine, this approach proved tobe “particularly important,” as we recognized early that [now PresidentVolodymyr] Zelensky was likely to winthe election, that he was going to take policy in a positive direction, and that assetswere going to benefit,” he explained.
These insights benefitted from teammembers’ visits every six weeks lastyear. “That sort of legwork goes into alot of our research,” Baur noted.
In fact, the team visits around 80countries yearly, according to BradGodfrey, director of alternatives andasset allocation, and an institutionalportfolio manager with Eaton Vance.
“We like to look for turnaround stories, which is classic emerging marketinvesting. Look at Ukraine,” Godfrey
Alternatives Manager of the Year
Eaton Vance Management
Global Macro Absolute Return Strategy
said. Though corruption and other
problems run deep there, “the change in
direction is quite positive.” Baur agrees.
“While Ukraine has been on and off the
radar the past few years with their sov-
ereign debt default and restructuring,
we’ve been investing there [for years].”
Sometimes these frontier-like country
investments are “actually safer,” Godfrey
said. “There are informational advantag-
es to be had, because very few people are
looking there. And oftentimes, there are
very high risk premia. They compensate
you really well to take risk in the country.”
The team hedges possible illiquidity
in these markets before taking on invest-
ments there “to offset [illiquid market]
risk, the trading and operations team has
spent a lot of time developing relation-
ships in local markets, so we’re not reliant
on finding another investor in New York or London,” Baur said.
Although the team has a long-term horizon, it keeps a close eye on events thatcan affect its investments. For example, the portfolio specialists believed early onthat there were good opportunities in Argentina. With the results of the August election surprising everyone (as the center-left party trounced conservatives), “We veryquickly exited [our long bond] position because of what we perceived as a negativechange in direction in Argentina. That’s a quintessential example of how we manageour positions or view our investments,” Baur said.
COVID- 19 also has impacted strategy. Brazil has the second-highest number ofcases of it (after the U.S.) in the world. “That has hurt that economy. COVID- 19 certainly has affected ways we look at a country like Brazil,” he added. — Ginger Szala
“We very quickly exited[our long bond] positionbecause of what weperceived as a negativechange in direction inArgentina. That’s aquintessential exampleof how we manage ourpositions or view ourinvestments.”
Title: Portfolio Manager
Years with Eaton Vance
Years in Financial Services: 15
Investment/Asset Class Focus:
Asset Management Firm: Eaton
Vance Management (an affiliate of
Eaton Vance Corp.)
Firm Headquarters: Boston with
offices in: New York, London, Tokyo
Year Firm Founded: History datingback to 1924
Number of employees: Over 200
( 1,870 with Eaton Vance Corp.)
AUM as of April 30, 2020: $133.9
billion; $465.3 billion with Eaton