We earlier reported updates from Baupost Group’s second quarter letter, in which Baupost Group’s head of public investments, Jim Mooney, did not sound overly optimistic about Europe and the ongoing recovery in the region. However, the hedge fund has found several opportunities in the European credit space. Back in 2011, Baupost opened its London office, to tap the European distressed debt market as banks in the region deleveraged.
Baupost Group building up its credit portfolio in Europe
Baupost protected its portfolio from interest rate volatility which spiked towards the latter part of the second quarter by establishing hedges in rates. Other than these tactical positions, the hedge fund also initiated new equity positions and added further to existing ones; some of these bets were made in Europe.
In peripheral European countries, the fund has closed an unsecured consumer loans portfolio and is expecting considerable returns from the position at the end of this year. The fund also bought performing RMBS in Northern Europe
Recently FT reported that John Paulson and a group of other hedge funds are investing in Greek banks, the names mentioned included Baupost Group, as well. As banks in Greece struggle to recover, investors are lobbying to fast track the privatisation process. Previously Baupost has successfully invested in Greek sovereign debt in 2012.
Baupost Group expanding in real estate
Cashing in on the reduced lending power of European banks, which are still recovering from a balance sheet recession, Baupost is exploring the alternative lending space. The fund is partnering up with a non-traditional lender to offer loans in a major European country in a sector where banks are not active anymore.
Check out the latest from SocGen on European real estate.
The fund has also been expanding its holdings in the European real estate space. Baupost was near to closing deals worth $520 million in the real estate portfolio in the U.S. and Europe, according to the shareholder letter which was released in July this year.
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