Wim-Hein Pals, who manages US$18 billion in emerging markets at Robeco Institutional Asset Management, has returned to Argentine equities after abandoning them nine years ago. The move signals growing investor confidence in President Javier Milei's economic reforms and the country's energy export boom.
Pals didn't wait for MSCI Inc to restore Argentina to its closely followed benchmark index. He started building his position in the first quarter of this year and has been adding to it ever since. That's a notable vote of confidence from a fund manager who oversees one of the industry's largest emerging-market portfolios.
The Energy Catalyst
Argentina's energy boom drove the decision. The Vaca Muerta shale formation has transformed the country's export profile, delivering a record energy trade surplus in the first half of the year. "Argentina has a huge net export of energy and, to a certain extent, is the beneficiary of high oil prices," Pals said. That "helps the trade surplus, helps the currency. It's sort of a catalyst for the whole country."
The energy windfall represents exactly the kind of market-driven economic improvement that doesn't require government spending or intervention. Rising oil and gas exports generate foreign currency, strengthen the peso, and create fiscal breathing room without adding to public debt.
Pals, who joined the Rotterdam-based firm in 1990, also pointed to Milei's economic reforms, which have earned praise from ratings firms in recent credit upgrades. He's gained exposure through shares of Argentine energy and financial companies listed in the US.
Political Risk Remains
The position in Argentina isn't "huge," Pals acknowledged. He's mindful of political risk, particularly with Milei facing re-election next year. Still, he said fundamentals are improving and decided to move ahead of passive investors who typically wait for benchmark inclusion.
Argentina isn't his only off-benchmark bet. Pals added Vietnam as he expects the country to attain emerging-market status by the end of 2027, unlocking passive inflows. He said Argentina may follow in 2028 or 2029.
Taking Profits in Tech
Elsewhere, Pals has taken profits in Taiwan's chipmaker-heavy market after a strong run in technology shares. He's now "maximum underweight" the Asian market, with an allocation 500 basis points below its benchmark weight, a limit he uses as a rule of thumb.
"Some of them tripled, quadrupled," Pals said, referring to stock prices. "We took money off table."
Enthusiasm for companies tied to the artificial intelligence supply chain has propelled Asian technology stocks. Just three companies — Taiwan Semiconductor Manufacturing Co, Samsung Electronics Co and SK Hynix Inc — account for more than 30 percent of the MSCI Emerging Markets Index.
While the outlook remains bright for many of these companies, Pals is mindful of concentration risks. That's led him to be underweight Asia, an atypical move in his fund's 32-year history. The Robeco Emerging Markets Equities Fund has outperformed 84 percent of its peers over the past five years, according to Morningstar Inc data. This year, it's beaten 60 percent of them.
Poland, Hungary and Greece are among his favorite markets in Europe. His largest regional overweight is Latin America, where he favors countries from Mexico to Peru.
"We don't see EM as a leveraged play on AI," Pals said. "It's much more than that."
Why This Matters:
Robeco's return to Argentina after nearly a decade demonstrates how market-oriented reforms and natural resource development can restore investor confidence without massive government stimulus programs. The energy export boom from Vaca Muerta shows the power of unleashing private sector development in a resource-rich country. Milei's fiscal discipline and deregulation have earned credit upgrades, proving that sound economic fundamentals matter more than political popularity. The decision to invest before MSCI benchmark inclusion also shows that active managers reward policy improvements ahead of passive flows. If Argentina continues on this path and achieves emerging-market status by 2028 or 2029, it would validate the approach of fiscal responsibility and market liberalization over state-led development models. The political risk remains real with elections next year, but the fundamental transformation is attracting serious capital.