The government of Venezuela has defaulted 11 times since 1800. To believe that the next loan will be different is to play the role of Charlie Brown kicking Lucy’s football.

Meet Tina Vandersteel, emerging-markets bond guru in the Boston office of Grantham, Mayo, Van Otterloo. She has made money on Venezuelan bonds. Also on lending to Russia and to the planet’s worst-managed oil company. She has investors’ capital in Belarus, El Salvador and Uzbekistan.

Vandersteel oversees $10 billion, much of it tucked away in separately managed accounts. The most visible portion is the $2.2 billion GMO Emerging Country Debt Fund, which she took over in 2016 at the midpoint of a career that star­ted, in 1990, fresh off an economics degree, evaluating Third World debt at the predecessor to JPMorgan Chase.

Under Vandersteel the GMO fund has had unusual success in a difficult market for fixed income. Over the past dec­ade Vanguard has eked out 1.1% a year on its fund hol­ding medium-term U.S. Treasuries and only a little more, 3%, on its index fund holding government bonds in emer­ging markets. Her fund has delivered 6.4% a year, net of 0.54% in fees.

How do you make money lending to potential defaulters? Mostly by trading. “It’s a shockingly inefficient space,” she says.

Venezuela? Its bonds got as low as 6 cents on the dollar. At this price they were an interes­ting long shot, worth putting in the portfolio for amusement. Post-Maduro, the fund’s Venezuela bonds have recovered to between 37 and 54 cents.

The U.S. dollar is richly priced, having briskly appreciated in the past decade against emerging-market currencies like the Brazilian real and the Polish zloty. Want to........

© Forbes