(Bloomberg) -- Discovery Capital Management LLC, the $15 billion macro-economic hedge fund run by Rob Citrone, is betting on a strengthening economy in Mexico, echoing comments from money managers including Laurence D. Fink’s BlackRock Inc. and Bill Gross’s Pacific Investment Management Co.
“Mexico is our highest-conviction long idea for 2014,” the firm said in a letter to clients, a copy of which was obtained for Bloomberg News. “During 2013, Mexico has undertaken the most ambitious and revolutionary reform agenda of all emerging markets. On a global basis, its reform agenda even exceeds Japan’s in our view.”
Mexico’s perceived creditworthiness has soared since President Enrique Pena Nieto was elected in 2012 on pledges to open the state-controlled energy industry to more private investment and boost tax revenue. Fink, who runs the world’s largest money manager as BlackRock’s chief executive officer, said last year the plan would turn Mexico into one of the world’s biggest energy producers and unleash an investment boom -- making the nation his favorite international destination to put money.
Citrone started South Norwalk, Connecticut-based Discovery in 1999 and last year returned 27.5% from its main fund, according to an investor report. Macro funds, which seek to profit from broad economic events by trading everything from bonds to commodities, lost about 2.2% last year, according to data compiled by Bloomberg.
Patrick Clifford, a spokesman for Discovery, declined to comment.
Discovery said it expects the dollar to rally against most currencies this year, fueled by a tightening of monetary policy and a reduction in the current account deficit. It also said it expects the Standard and Poor’s 500 Index to gain about 10% to 12% this year. The index rallied 30% in 2013.
“Stocks will be supported by stronger earnings growth, reasonable price-to-earnings multiples, share buybacks, and relatively easy monetary policy,” Discovery said.
The firm said it’s betting against an unnamed “high-cost” U.S. iron ore producer and a “major miner,” as well as a European and two north American copper producers.
“While most industrial metal prices will likely suffer as China restructures, we are most convinced about copper and iron ore,” the hedge fund-firm said, citing an expansion of production capacity between 2013 and 2015 by BHP Billiton Ltd., Rio Tinto Group, Vale SA and Fortescue Metals Group Ltd.