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Latin America ETFs to Play Hedge Funder’s Picks


Investors may take a look at exchange traded funds that track Mexico and Argentina as hedge fund firm Third Point sees potential opportunities in the two economies.

Daniel Loeb, head of Third Point, argues that Argentina is likely to reach an agreement with its holdout creditors by year’s end, which would “undoubtedly benefit the Argentinian economy,” Reuters reports. Loeb is also bullish on Argentine oil company YPF SA.

Holders of defaulted debt demanding compensation in U.S. courts could support a delay of a ruling that blacks payments on restructured notes to provide more time for negotiations, Bloomberg reports.

“Investors see it as positive because it means we’re getting closer to a solution,” Jorge Piedrahita, the chief executive officer of Torino Capital LLC, said in the Bloomberg article.

ETF investors can capture growth in the Argentine markets through the Global X FTSE Argentina 20 ETF (ARGT) . ARGT includes a 12.0% weight in YPF Sociedad Anonima. The energy sector makes up 16.5% of the overall portfolio. ARGT is up 16.6% year-to-date.

Additionally, Loeb believes the macroeconomic conditions in Mexico were “very attractive” after government reforms, and the stronger economic growth could push up rents for Mexican retail, office and warehouse properties. Consequently, he is also bullish on Mexican real estate investment trust Fibra Uno.

Additionally, under new economic reforms, Mexico’s energy sector will shift form a market run by a single company, Pemex, to a competitive one with private oil and gas firms operating under contract with the state, Wall Street Journal reports.

The iShares MSCI Mexico Capped ETF (EWW) includes a 3.6% allocation toward Fibra Uno Administracion REIT. The financial sector makes up 21.5% of the fund’s portfolio. EWW is up 2.6% year-to-date. [Mexico ETFs Get Help From Surprise Rate Cut]

Alternatively, the db X-trackers MSCI Mexico Hedged Equity Fund (DBMX) has a 3.6% weight in Finbra Uno and a 24.5% allocation toward financials. This Deutsche Bank ETF hedges against a currency risk.  DBMX is up 7.0% since it began trading Jan. 23, 2014.

For more information on Latin American economies, visit our Latin America category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.