Ashmore, which has $51 billion of assets under management, is no stranger to defaults there. The investment firm owned the bonds of Oceanografia SA when the oil-services provider halted payments on its notes in 2014 and was seized by the government in the wake of fraud allegations. Ashmore also held the notes of homebuilders Corp. Geo SA, Desarrolladora Homex SAB and Urbi Desarrollos Urbanos SAB when they stopped servicing their bonds in 2013 following a change in Mexico’s housing policies. 

Despite the defaults, Ashmore’s Jan Dehn says changes in policies for everything from energy to telecommunication in recent years will make the country a profitable place to invest. For example, Mexico changed the constitution in 2013 to allow foreign drilling for the first time since the 1930s, part of President Enrique Pena Nieto’s effort to boost growth in Latin America’s second-biggest economy.

“Mexico is a long-term, permanent investment destination for us,” said Dehn, Ashmore’s head of research. “You get defaults in all countries, and you try to mitigate these defaults by active management. This applies in all cases, not just in Mexico.”

Ashmore’s Emerging Markets Corporate Debt Fund, which has $1.62 billion in assets, including ICA bonds, has lost 2.7 percent in the past year, trailing 60 percent of its peers, according to data compiled by Bloomberg. It has lost 3.3 percent in the past three years, lagging behind 65 percent of similar funds.

Ashmore owns ICA notes due in 2017, 2021 and 2024, data compiled by Bloomberg show. Mexico’s biggest construction company said Dec. 18 it would skip a bond payment due that month, which pushed all of ICA’s $1.35 billion of notes into default. The builder is struggling to shore up its finances amid government cutbacks to infrastructure projects and a plunge in Mexico’s peso against the dollar.

Mexico’s currency fell 0.2 percent to 17.9670 per dollar at 12:04 p.m. in New York, after touching a record low of 18.0220 on Sunday.

Dehn declined to comment on Ashmore’s bond holdings.

Junk-rated bonds are plunging around the world as investors pull money out of funds dedicated to the risky securities and a growing number of hedge funds in the U.S. shut down.

Ashmore “may not be pleased with how things have unfolded” in Mexico, said Karin Anderson, an analyst at fund-research company Morningstar Inc. “Liquidity in high-yield credit is something that’s really top-of-mind for everyone right now because we’ve seen some blowouts in the U.S. recently. At this point, the outlook is not good. But they’re not necessarily going to sell because it’s in default -- either because they can’t or because they think there is some decent work-out situation that can happen.”

Dehn said investors are well compensated for the risks they’re taking, given the higher yields Mexico and its companies offer on their bonds.

Debt from Mexican businesses yields 3.83 percentage points more than U.S. Treasuries, data compiled by Bloomberg show. Government bonds pay 3.37 percentage points more.

“Mexico is a well-run economy that’s paying you a positive yield,” Dehn said.

©2016 Bloomberg News