Hedge Funds Greek Debt Trade
Greek Debt Turning into Trade of the Year for Some Hedge FundsIt seems an unlikely way to produce huge profits these days: greek debt. But hedge funds that scooped up dirt-cheap Greek bonds are some of the biggest winners after betting that the debt would rise in value as the prospects of a Greek exit from the Euro diminished.
News that Athens - backed by euro zone ministers and the International Monetary Fund - will buy back some its own debt from private investors sets a floor under the price of its bonds, handing many who picked them up at rock-bottom levels big gains.
The funds - which include Daniel Loeb's Third Point - have spent months building up positions in the debt-beleaguered country's bonds, rightly betting that their price would rise as the risk of a Greek exit from the euro zone receded.
Some have already banked profits from that bet, but indications Athens will target a cost of around 35 cents on the euro in its buyback plan, if successful, is a boon for those still holding the bonds.
"This is very positive and a huge step forward," Achilles Risvas, chief executive officer of hedge fund Dromeus Capital said. "The probability of a Grexit has decreased significantly."
Risvas owns Greek bonds currently trading at 28.5 cents on the euro, bonds he bought at 18 and 19 cents. Source