A Greece focused hedge fund has been launched by Dromeus Capital Group, an emerging markets alternative investment specialist.
Dromeus is thought to be one of first funds to focus on opportunities in Greece.
The fund will focus on opportunities created by the dramatic sell-off in Greek assets since the start of the financial crisis. The Greek stock market has dropped by 83 per cent and the real GDP has contracted by 20 per cent since 2008.
Dromeus says that the size of the fund will be limited to EUR200m until there are substantial improvements in the liquidity of the Greek debt and equity markets.
The launch of fund is a change in Dromeus’ previous negative stance towards Greek assets which first warned investors of the impending problems of Greece’s debt in the aftermath of the financial crisis in 2008.
“International investors are an interesting bunch. They were willing to lend Greece at two per cent over bunds, despite the country having had a public debt of over 100 per cent and excessive current account and budget deficits. It made no sense to us,” says Achilles Risvas, chief executive and managing partner of Dromeus Capital Group.
“The huge uncertainty and political instability has caused investors to sell down Greek assets to prices from which the likelihood of further declines is limited. This is the ideal environment for deep value investors. Prices of stocks and bonds are cheap both versus historical norms and relative to comparable Eurozone assets.
“The market is priced for the worst case scenario of a Greek exit from the Euro and further, even more extreme distress to the Greek economy.”
However, Achilles says the fund will be investing on the basis that a revaluation in Greek assets will be a protracted process with more periods of extreme volatility ahead.
Initial investors in the Dromeus Greek Advantage Fund include European fund of funds, private banks, asset managers and family offices around the world. The fund will use futures to lower the volatility of the portfolio and will not use leverage.
Investments in the Greek stock market will focus on businesses with hard assets, strong generation of cash flows and limited external funding requirements. The fund will avoid those businesses with weak balance sheets or that have to deleverage.