Saturday 25 February 2017

Meet the financial whizzkid betting €4bn on our economic recovery ...

Donal O'Donovan

Donal O'Donovan

Bond investor Michael Hasenstab of Franklin Templeton Investments
Bond investor Michael Hasenstab of Franklin Templeton Investments

HE gambled on Ireland's fortunes and is set to make a hefty €750m profit. California-based money manager Michael Hasenstab has emerged as the leading champion of the Government's economic strategy.

Mr Hasenstab bought as much as €4.07bn of Irish government IOUs on the international bond markets at a time when few others would touch them.

He made the trade because he is convinced the Government here will never default on its debts -- and the gamble is already paying off.

Mr Hasenstab's bold move has fostered confidence in others and dramatically improved the Government's chances of escaping from the EU-IMF straitjacket.

His gamble could mean a windfall for thousands of American families that backed the massive punt by investing in his company fund.

Mr Hasenstab is a vice-president of Franklin Templeton Investments, whose role emerged in a report in the 'New York Times'. It named the company as the key player behind a seven-month-long recovery in the prices that are being paid for IOUs owed by our Government.

Franklin Templeton manages billions in saving and investments for American families. Mr Hasenstab leads its global trading in debts owned by governments.

Knock-down

Mr Hasenstab bought the Irish government IOUs from rival firms last year when prices were falling. The IOUs, which are known as government bonds, came at knock-down prices but Mr Hasenstab was convinced Ireland would never renege on its debts.

These trades alone helped restore global confidence in the Irish Government's finances -- to the extent that the "yield" or interest demanded for Irish loans has fallen back to pre-bailout levels in some cases. It also means a big pay day for Franklin Templeton when the debts are repaid.

Mr Hasenstab has made no secret of his backing for Ireland. Last October he wrote an article in the 'Wall Street Journal' heaping praise on Irish efforts to recover from the debt crisis, in contrast to Greece and Portugal.

"Ireland's example could offer other indebted countries some inspiration for solving their own crises," he said at the time. "Irish citizens and politicians rolled up their sleeves and quickly worked to repair and rebuild."

New data reveals Mr Hasenstab and his team could have bought as much as $5.4bn (€4.07bn) of Irish government bonds on the cheap over the past year.

Mr Hasenstab is remaining tight-lipped about the details of his deal-making, but traders in Dublin say many of the bonds were bought at prices of as low as 80c in the euro. That could mean a $1bn (€750m) profit for him and his backers when the Government repays the debt in full.

"This investment in Irish bonds is a positive sign of investor confidence in the Irish sovereign," a spokesman for Finance Minister Michael Noonan said last night.

Mr Hasenstab's profits are being made at the expense of rival investors who sold out early. It will not cost the Irish State an extra cent because ministers of all stripes have always maintained that the bonds would be repaid.

Irish Independent

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