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SA bond party could get very ugly - Citadel

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(Richard Drew, AP)
(Richard Drew, AP)

Johannesburg - George Herman at Cape Town-based Citadel Investment Services is dumping the emerging world’s best-performing bonds.

South African government rand notes have earned 14.3% this quarter in dollar terms, the most out of 31 developing nations tracked by Bloomberg indices and more than twice the return of second-placed South Korea. Yet Herman says the move has gone too far. He’s selling all his holdings in favour of shorter-dated securities.

Investors chasing returns as developed nations maintain economic stimulus may be underestimating South Africa’s domestic risks and the willingness of the US Federal Reserve to increase interest rates, said Herman, whose Citadel SA Protected Equity H4 Fund has outperformed about 80% of its peers this year, according to data compiled by Bloomberg.

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