Hedge funds have repeatedly come to Greece, in expectation of outsized profits in the long run. During Greece’s six year long recession, the troubled economy has twice sought help from bailout programs. While there is nothing rosy about the recovery yet, the demand for Greek assets runs high. Over the past few years, nearly every high profile hedge fund manager has invested in Greek debt and/or equities and they are still in hot pursuit of any actionable opportunities.
Greece a huge target for hedge funds
A comment from CEO of Piraeus Bank, Anthimos Thomopoulos, sums up the situation aptly: “Only nine months ago, global sentiment was, ‘I don’t want to touch anything Greek, not even Greek yogurt, now investors don’t want to see anything but Greece. It’s a strange, idiosyncratic market, where you put money in a developed economy, albeit in distress, with emerging-market type of growth expectations with a strong currency.”
Between the privatization and recapitalization of Greek companies, Greece opened doors to new investors at extremely cheap valuations. John Paulson, Seth Klarman, Dan Loeb, and James Dinan have all invested in various asset classes.
Most recently James Dinan’s York Capital bought a 10% stake in Greek construction company, GEK Terna. The 100 million euro investment allows York Capital to subscribe to the company’s share capital increase, and gives it a 3% stake in GEK Terna’s energy arm, Terna Energy.
This new investment is in addition to Dinan’s reportedly existing position in two major Greek banks, Alpha Bank and Piraeus. According to Financial Times, York Capital is one of the many hedge funds who have undisclosed positions in these Greek banks. York Capital has not confirmed stakes in these banks officially.
John Paulson, Jon Bauer go for big banks
FT also reported that John Paulson was among the frontrunner investors in recapitalized Greek banks. He said that Paulson & Co. had significant stakes in Alpha Bank and Piraeus Bank, which he thought were well-equipped to recover on the back of a good management.
Jon Bauer’s Contrarian Capital initiated a position in the largest lender in Greece, the National Bank of Greece (NYSE:NBG) in Q3. According to the quarterly 13-f filing, Contrarian holds 895,872 shares of NBG’s common stock. Contrarian at the same time sold out of its position in National Bank of Greece (NYSE:NBG)’s preferred shares in the last quarter. The fund bought the position on cheap levels, and shares were up 44% in October alone. Citadel Advisors and Israel Englander’s Millennium Management also bought new positions in the Greek lender in Q3.
Bauer has been investing in distressed assets in Europe with very favorable results – the flagship Contrarian Capital Fund I is up 13.4% through October.
Dan Loeb’s Greek focused fund
One of the earliest investors in Greece was the aggressive activist investor, Dan Loeb. His hedge fund, Third Point, bought a major position in Greek debt over the last couple of years and proceeded to record one of the largest profits on record from the investment. After profitably moving on from his position in sovereign debt, Loeb is now on the lookout for cheap Greek equities. Third Point launched the Hellenic Recovery Fund this year which is dedicated to investment in Greece only. In May this year, Loeb took a position in Energean Oil & Gas, a small Greece-based energy producer. Third Point invested $60 million in the company through its newly launched fund. Third Point has a lot of capital to dispense in Greece, however the fund has not disclosed any other investments so far.
Loeb was also one of the earliest to bid for a stake in OPAP, a Greek gambling monopoly which was privatized to raise money for bailout funds. However Loeb was unsuccessful in winning the bid and a consortium of investors, Emma Delta, became the major shareholder in OPAP instead.
Prem Watsa and Seth Klarman
Canada’s Warren Buffett, Prem Watsa, is on the prowl for Greek assets for a while now. Watsa was the first one to invest in JUMBO SA (OTCMKTS:JUMSF), a company that sells toys, books and stationary items. Even more recently Watsa bought a 5% position in the Greek industrial group, Mytilineos, making him the third-largest shareholder.
“We continue supporting Greece and believe that the country has made great progress in dealing with its serious economic issues,” said Watsa after making the $40 million investment in Mytilineos. Fairfax also confirmed that it will raise its stake in Eurobank Properties from 19% to 40% after making a $27 million investment in the real estate developer.
Watsa had also shown interest in National Bank of Greece at a previous time.
One of the most sought-after investors of the present times, Seth Klarman, has been interested in Athens like so many others. Baupost Group has netted decent profits from its long bet on Greek government bonds and at the same time has been busy in buying up equities as well. The fund acquired a 5.2% position in the coveted OPAP, in January this year. Reportedly Seth Klarman has been investing in Greek banks as well according to FT.
A previously unknown hedge fund made headlines this summer as it made a nearly $4 billion bid for Greek debt. Japonica Partners disclosed last month that it had become one of the largest, “if not the largest”, holders of Greek debt. The fund’s CEO, Paul Kazarian, said that the Greek debt should be rated A+ by Moody’s and that yields could tighten to less than 5% in 2014. Other Greece-based bond fund managers have also made a killing with investments in the sovereign’s debt.