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Polygon Global Up 10% In Q1 With Big Gains On Portugal Bet

Polygon Global Partners’s European Equity Opportunity Fund has gained a handsome 10.4% through the first quarter of this year, according to a letter to investors reviewed by ValueWalk. The fund uses an event-driven equity strategy and is one of the leading Europe-based hedge funds with $7.1 billion in assets under management as of June 2013.


Polygon hedge fund
Via Polygon investor letter

Polygon Global beats benchmark indices

Polygon Equity Opportunity fund particularly had a spectacular January when it gained 4.3%, which is an accomplishment considering that the average event-driven fund lost 0.23% in the period, according to the respective strategy index of Eurekahedge. The fund’s +10% gain in 1Q2014 is equally admirable – Eurekahedge Hedge Fund Index gained 1.05%, whereas the Event-Driven index was down 0.56% in Q1 2014.

In the monthly investor letter, the fund credited its 2.9% gain in March to its position in Banco Comercial Portugues SA (ELI:BCP), a Portugal-based commercial bank. The fund believes in the economic recovery that is playing out in the peripheral European region. Polygon said that banks like BCP are being under-estimated by the markets. In the letter, Polygon was optimistic that Portugal will pass legislation that will allow deferred tax assets in the banks’ balance sheets to be transformed into receivables from the State. This will help BCP in paying state aid to zero, and will cause bank’s shares to trade up.

Proton therapy to dethrone radiotherapy in the future: Polygon

Another company that Polygon is investing in is Ion Beam Applications SA (EBR:IBAB), a Belgium based company that manufactures equipment for cancer therapy. The fund believes that shares of Ion Beam are trading at a 50% discount in comparison with other medical equipment makers. In Polygon’s opinion, IBA is about to receive FDA approval to establish ProteusOne, a new compact center for cancer therapy. This new center will allow the company to offer proton therapy at a lower cost and with lesser side effects. Proton therapy is currently being tried as an alternative to radiotherapy for cancer.

Polygon has a position in Vodafone Group Plc (ADR) (NASDAQ:VOD), which the fund thinks is most actively positioned to benefit from the wave of consolidation in the European telecom industry. Vodafone can particularly benefit in Germany, Austria, Spain and Ireland. The company recently acquired one of Germany’s leading cable operators, Kabel Deutschland Holding AG (FRA:KD8).

The hedge fund also has a position in Brazilian telecom operator Oi, which incurred a loss in March. Polygon thinks that Oi’s prospective merger with Portugal Telecom, SGPS (ADR) (NYSE:PT) (ELI:PTC) is harmful to the company. The fund thinks that the proposed merger will not be approved by the authorities and in that case Oi has significant upside.

Chart via Novus Research
Chart via Novus Research

Polygon has also disclosed a slew of shorts publicly; the total market value of its short portfolio was up to $275 million according to data from Novus Partners. According to the monthly letter, the fund’s largest net shorts are in Financials and Materials. Polygon has been betting against Caixabank in Spain, CA Immobilien Anlagen AG (VIE:CAI) in Germany and Soitec SA (EPA:SOI) in France.