Episode summary
The Venezuela Factor: Why High-Yield, Emerging-Market Debt Is Having a Moment | Trillions
Trillions
· · Hosts: Joel Weber, Eric Balchunas · Guests: Jim Craig, Damian Sassower
Summary
Venezuela’s debt rally drove the episode’s central argument: defaulted emerging-market bonds can surge when political risk falls and sanctions ease, even before any formal restructuring. The host and the guests said Venezuela bonds had already doubled before the Maduro ouster and then climbed further, with Jim Craig explaining that Stone Harbor had been accumulating the debt after sanctions on secondary-market trading were lifted.
Craig framed the trade as a probabilities game, not a simple bet on regime change. He said the portfolio seeks defaulted bonds with high claim value relative to distressed prices, and that Venezuela, Lebanon, and similar credits can offer outsized upside if the timing works. Damian Sassower argued that the broader EM high-yield rally in 2025 also reflected low volatility, strong risk appetite, and a hunt for carry across distressed sovereigns and quasi-sovereigns.
The discussion then broadened into how the ETF is built: roughly half sovereign and half corporate, with concentrated exposure to countries such as Argentina, Ecuador, Sri Lanka, Ivory Coast, and Gabon. Both guests emphasized that active management matters because the opportunity set is small, politically driven, and highly idiosyncratic.
Key takeaways
- Jim Craig said Stone Harbor accumulated Venezuela debt after sanctions were lifted and saw the bonds as a high-claim-value default trade rather than a pure regime-change call.
- Damian Sassower said the 2025 rally in EM distressed debt was helped by suppressed volatility and strong demand for carry across sovereign and quasi-sovereign bonds.
- Craig said VEMY is roughly 55% sovereign and 45% corporate, with overweight sovereign exposure driven by opportunities in Venezuela, Argentina, and Ecuador.
- Sassower said Venezuela, Lebanon, and similar credits remain very small, high-volatility positions that can still dominate returns when political outcomes improve.
- Both guests said a restructuring would likely exchange defaulted Venezuelan debt for new debt, possibly with warrants or a new-money component.
- The episode argued that active ETFs can access complicated frontier-style debt that most investors would struggle to buy directly.
Notable quotes
“the debt has been been outstanding in trading for quite a while. More recently, the sanctions were removed from trading the debt”
“So you're buying something at 20. The claim value is very high. The what the what is difficult part is figuring out the timing of it”
“the risk sentiment suppression of volatility the VIX all the things that we look at right”
How the episode opens
Welcome to Trillions. I'm Joel Weber. — And I'm Eric Alchunis. — Eric, 2026 is already off to an interesting start. Uh I was on vacation for the holidays. Lost track of time, didn't know what day of the week it was, and then I woke up to the Venezuela news and was like, I guess I have to work on Saturday now. Um it was it was eventful.
Yeah, absolutely. I think most people were shocked by it. Um, but yeah, the news flow is ridiculous.
It's like a year of news in a week, every week. But in fact, the Venezuela thing already seems a little distant past, but it is a major deal. And we were struggling to get somebody on ETFQ, the TV show I do.
We wanted to talk about this. So, I did a F search, which is the search uh through ETFs. And I said, "Okay, which on the terminal, which ETFs hold
At least 1% of Venezuela?" And only four results, and they're all bond funds. And the only one that had the one that had the highest and was active was Vei, right? And that's the ETF. — Vy,
Vy. And um this is an active manager. I hadn't heard of them.
I know Verdice, it was a white label, but Stone Harbor was the name of the manager. Um I basically reached out to my buddy Seth over at Verdice. He uh hooked us up with Jim, who is on the show today, and we had a great discussion.
Um he came in at last minute and talked about the bonds and why he owned them and he bought them a year ago. So he saw something pretty early and I think that's interesting. Then I looked at the portfolio and it's like doing really well and there's some of these like really interesting countries that are like really killing it like Latin America countries but also outside of that.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- venezuela debt rally
- emerging market high yield bonds
- etf positioning
- bond restructuring
- emerging markets fixed income
Companies and tickers mentioned
- VRTS
- Virtus Investment Partners
- Bloomberg Intelligence
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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