Dromeus Capital Management SA is turning Greek tragedy into triumph.
When Achilles Risvas, chief executive officer of the $240 million investment firm, and Jason Manolopoulos started a fund to wager on Greece’s recovery in October 2012, the country was in intensive care with euro-area governments pushing its leadership to make deeper spending cuts after a bailout. Greece has since largely repaired its finances, returned to the bond market, and according to economists will grow its economy for the first time since 2007.
That’s helped the Dromeus Greek Advantage Fund gain 26 percent this year through June, according to an investor update obtained by Bloomberg News. The strategy has gained 160 percent since inception, compared with less than 10 percent for the average hedge fund.
Dromeus, based in Geneva with an office in Athens, timed the bet well. Within months of the fund’s inception, Greece had convinced international creditors it could press ahead with budget cuts and largely curbed speculation the country would have to exit the euro. Other investors were also taking notice. Daniel Loeb’s $14 billion New York-based Third Point LLC started a Greek fund in April 2013 and billionaire John Paulson began investing in the nation’s banks that year.
“There was heavy influence to lend to the Greeks and not let them default,” said Nick Markola, head of research at Fieldpoint Private, a $3 billion Greenwich, Connecticut-based private bank and wealth-advisory firm. “Hedge funds have seen the opportunity to capitalize and get attractive returns.”
Manolopoulos, author of “Greece’s ‘Odious’ Debt,” a 2011 book detailing the origins of the country’s economic mess, didn’t immediately provide comment.
Dromeus recently profited from its participation in the recapitalization of Greece’s third-biggest bank, Eurobank Ergasias SA, according to a second-quarter letter, a copy of which was obtained by Bloomberg News. The bank sold shares in April to plug a capital shortfall.
“The recapitalization will create significant value for shareholders with Eurobank,” Dromeus wrote in the letter. “Whilst the Eurobank shares finished the quarter up 19 percent from the placing price they remain a core holding for the fund as we believe there is further upside in the trade.”
Paulson & Co. held positions in Alpha Bank SA and Piraeus Bank SA, according to a first-quarter letter to investors, a copy of which was obtained by Bloomberg News. The firm started buying them in mid-2013 and holds the stakes in its Recovery Fund, which is up 4.5 percent this year and surged 63 percent in 2013. Armel Leslie, a spokesman for Paulson & Co. with WalekPeppercomm, declined to comment.
The two banks in March raised almost 3 billion euros ($4.1 billion), mostly from foreign investors, to bolster their reserves. Piraeus also sold 500 million euros of three-year bonds, in the first public debt sale by a Greek lender since 2009.
Loeb’s firm posted a 12 percent gain this year through June in its Third Point Hellenic Recovery Fund, according to a person with knowledge of the matter. The strategy has gained a cumulative 34 percent since inception in April 2013, said the person, who asked not to be identified because the information is private. Elissa Doyle, a spokeswoman for Third Point, declined to comment.
Economists expect Greece’s economy to exit recession this year, expanding 0.2 percent, according to a Bloomberg News survey published on July 14.
Greece’s return to bond markets after a four-year exile hasn’t convinced economists it can avoid a third bailout. Six out of 10 economists in a Bloomberg News survey said Greece will need to top up the 240 billion euros of loans received from Europe and the International Monetary Fund since 2010, when it lost access to bond markets. The IMF forecasts Greece will have a 12.6 billion-euro financing gap next year. [Bloomberg]