ATHENS: A handful of hedge funds have been finding trading opportunities in the turbulence of Greece’s debt showdown.
While the knife-edge talks on refinancing Greece’s debt, which have now been postponed until the weekend, have been enough to put off most traders, a small number have been attracted by the potentially high returns they think are on offer.
While in 2012 funds reaped enormous gains from buying Greek sovereign debt, managers this time are also looking at the corporate sector, where they believe some bonds have fallen to unjustifiably cheap or distressed prices as a result of the political uncertainty.
Such trades look particularly enticing in a world where most assets are seen as fully priced or expensive and hedge fund returns are meager. Funds on average gained 3% last year and are up 3.9% this year, according to Hedge Fund Research.
“It is a pretty exciting risk-reward, and there aren’t many distressed assets on the planet, for the most part,” said Troy Gayeski, senior portfolio manager at SkyBridge Capital, which runs $9.7 billion in assets.
Mr. Gayeski said that SkyBridge has around 1% of its assets in Greece-focused hedge funds, which are investing mainly in long-dated Greek government bonds and bank stocks. It started buying early this year and has been adding exposure since then. He said that a deal between Greece and its creditors was still likely and said Greek bank stocks could double in value.
“We’re still optimistic,” he said. “I see an 80% probability we get a deal and you could double your money in 12-18 months, given how cheap the banks and Greek government bonds had gotten.” Meanwhile, Swiss-based hedge fund Swan Asset Management SA, which runs just under $1 billion in assets, has bought bonds issued by Greek firms Titan Global Cement and Hellenic Petroleum in recent days, spending around €5 million-€6 million ($5.6 million-$6.7 million) in total on the positions.
“If you really want to think about distressed opportunities in Europe, I like a couple of Greek corporates,” Swan’s Chief Investment Officer Fabrizio Biondo said at the GAIM 2015 conference in Monaco this week.
