Venezuelan defaulted bonds soar, hedge funds emerge as big winners, Wall Street: there's still room for further gains

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Over the weekend, the United States launched airstrikes on Venezuela and captured Maduro and his wife. Trump stated that he would "manage" Venezuela until a "secure" transition is implemented. Influenced by the news, Venezuelan bonds rebounded sharply, giving hedge funds and other investors who had previously bought the debt at extremely depressed prices considerable returns.

Maduro has been in power since 2013. In recent months, as U.S. President Trump has ramped up pressure on Maduro, fund managers have continued to increase their holdings of Venezuelan debt. Nevertheless, the events over the weekend shocked traders and leaders around the world.

In early Monday trading, defaulted bonds issued by Venezuela and its state-owned oil company PDVSA surged, with the sovereign bond maturing in 2027 rising 7 cents per dollar of face value, an increase of around 22%, marking the largest single-day gain since 2023. This pushed the bond price to 40 cents, double what it was six months ago, though still below the potential recovery value investors expect if the country pursues debt restructuring.

Market sentiment was also boosted by the shift in attitude from Venezuela’s acting president, Delcy Rodriguez. She had previously demanded Maduro’s release and called his arrest an "act of barbarism," but later switched to call for a "cooperation agenda" with the United States. Analysts say that while her latest remarks may indicate readiness to cooperate with Trump, they could also anger hardliners within the government.

Barclays Bank stated that its previous judgment was overtaken by events, so just 14 hours after downgrading Venezuelan bonds to "underweight," it swiftly upgraded them to "neutral weighting."

Bradley Wickens, founder of macro hedge fund Broad Reach Investment Management, which focuses on emerging markets, said, "The projection of American power is quite strong and is well beyond anyone’s expectations. There’s at least 50% further upside potential, and that prospect is very likely to be realized."

Wickens revealed that his firm’s $1.5 billion Broad Reach Master Fund has risen over 5% this year, building on a 12% gain in 2025. This jump is mainly thanks to its bet on Venezuela, a position established at the end of 2024 based on the expectation of a Trump victory. The fund’s position in Venezuelan bonds is considerable and remains a "high conviction trade."

Ashmore Group Plc, which specializes in managing emerging market assets, saw its share price soar as much as 14%, with market speculation that the company will benefit from these developments.

A Wallstreetcn.com article notes that political changes in Venezuela are triggering a wave of "gold rush" activity among hedge funds. The Tribeca fund, which doubled returns last year, plans to invest as much as 10% of its capital in the country, with its team already conducting on-site research. Despite extraordinarily high safety and legal uncertainties, risk-oriented investors are seeking to get in ahead of large institutions, seeing it as "one of the greatest investment opportunities in history."

Key Points to Watch in Venezuela’s Bond Market

However, analysts point out that there are significant questions about the extent of ultimate U.S. influence and whether, given political uncertainty, oil companies will be willing to invest in Venezuela’s battered oil infrastructure.

Furthermore, whether investors will get returns depends on whether Venezuela will restructure its $154 billion in defaulted bonds, loans, and legal claims, with creditors spanning from Wall Street to Russia.

Some hedge funds believe restructuring could begin as soon as this year, but most investors expect it to be a long and complex process. Citigroup reiterated its "long" recommendation for Venezuelan bonds, while noting the restructuring will be "extremely complicated" and comparable to Greece’s debt restructuring in 2012.

Nicolas Jaquier, Fixed Income Portfolio Manager at UK asset manager Ninety One UK Limited, said: "A successful restructuring ultimately requires a government with legitimacy and the ability to credibly commit to reform, and generally also requires a support program from the International Monetary Fund (IMF). There remain major obstacles and uncertainties, and the current leadership lacks clear legitimacy to conduct debt restructuring negotiations."

Even so, the market remains optimistic, believing regime change could end Venezuela’s isolation from most of the global economy. This isolation has lasted over a decade and has sparked the worst refugee crisis in Western Hemisphere history.

Venezuela began defaulting on debt in 2017. Two years later, the U.S. cut ties with Maduro's government and banned American investors from buying the country’s debt. After JPMorgan lifted secondary market trading sanctions in 2023, these bonds were included again in its widely followed indexes. Since then, betting on Venezuelan bonds has been one of the most profitable trades in the developing world, with gains accelerating last year as overall risk appetite increased.

Previously, junk-rated sovereign bonds from countries such as Lebanon and Ukraine, which have enacted reforms or emerged from default, also posted eye-catching returns in 2025.

Risk Disclosure and DisclaimerThe market has risks; investing must be done with caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investments made based on this article are at your own risk. ```