Hedge funds get ready for the 'Donroe Doctrine' trade

Call it the “Donroe trade.”

- Caitlin McCabe

Caracas is now drawing foreign investors seeking gains from recent upheavals..

(AFP)

After the brazen capture of Venezuelan strongman Nicolás Maduro, investors are racing to capitalize on President Trump’s ambitions to dominate the Western Hemisphere.Hedge funds and other investment firms, already boosted by a sharp rally in Venezuelan debt, are mapping out trips to Caracas to scope out on-the-ground opportunities. Some are investigating niche instruments, like arbitration claims and unpaid state debts.

Others are eyeing debt in Colombia and Cuba, while shares of a tiny bank in Greenland—another territory in Trump’s sights—have surged recently as the U.S. president pursues his own spin on the Monroe Doctrine that saw 19th-century America claim half of the globe as its sphere of influence.

“This is just the beginning for us, the beginning of a much bigger trade,” said Celestino Amore, co-founder of Canaima Capital Management, which began betting on Venezuelan debt more than five years ago.

Amore estimates his $150 million hedge-fund firm, based on the English Channel island of Guernsey, was recently up about 150% from a year earlier in its global opportunities fund, thanks to those investments.

Past pushes into emerging markets that have reopened to foreign investors offer a cautionary tale, some analysts and bondholders say. Investors previously piled into countries such as Russia, Myanmar and Iraq, only for problems such as conflict, corruption and currency crises to turn their bets upside down.

But investors hope for a different outcome in Venezuela, encouraged by recent success betting on Trump’s interventionist foreign policy. Hedge-fund managers scored big last fall betting on Argentina, following Washington’s $20 billion rescue package for the country and the decisive victory for the party of Javier Milei, a Trump ally, in the midterm elections.