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Hedge fund Arini to launch new credit funds as growth outlook worsens -letter

Hedge fund Arini to launch new credit funds as growth outlook worsens -letter
By Reuters
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By Nell Mackenzie

LONDON - Arini, the $2.3 billion hedge fund run by a former Credit Suisse banker, will launch two new funds this year aiming to profit from uncertainty over how a recession might hit European corporate debt, a letter to investors seen by Reuters shows.

One fund will ask investors to commit capital for a longer period to buy stressed and distressed bonds and other debt instruments, according to the letter.

The second will focus on the riskiest tranches of debt products and may also trade derivatives meant to hedge against the possibility of a company default.

Credit-focused Arini's main fund was launched by London-based Hamza Lemssouguer in January 2022. Now it is following other specialist hedge funds seeking to take advantage of market uncertainty and the flight of investors less familiar with European credit, the letter said.

Amid the energy crisis and rising interest rates, Europe had its second-highest default count since 2009 last year, according to S&P, with a default rate of 1.4%, which the rating agency expects to reach 3.25% this year.

In its letter, Arini said it planned to take advantage of the price difference between the highest- and lowest-rated European bonds and, depending on the firm, would take both buy and sell positions.

It also sees a disconnect between how a company's debt and stock prices signal potential liquidity problems and plans to use long and short positions to take advantage of this as markets grow more volatile.

Arini's flagship Master Fund returned 14% in January, a source familiar with the matter said, after an annual return of almost 6% in its first full year of trading.

Arini has hired Mehdi Kashani, a senior structured credit trader who joined in August from BNP Paribas, while Rishi Patel and Emeric Faith joined as research analysts from Lazard and Triton Partners respectively, the letter said, bringing the fund's headcount to 21.

Arini declined to comment.

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