In 2013, while emerging markets beta was performing well, Sandglass Capital Co-Founder and CIO, Genna Lozovsky, and his Co-Founder on the business side, Michelle Kelner, identified what they saw as a greater opportunity – alpha in stressed and distressed credit within emerging markets.
As of June 2024, approximately a decade since its inception, sources told Hedgeweek® that Sandglass had posted a cumulative net return of 279.5%. In 2024 alone, the firm delivered a 39.81% return, according to these sources. Its performance in the first three quarters earned it a spot among the top 50 hedge funds in the Global Investment Report, according to Bloomberg.
Sandglass has outperformed comparative benchmarks – Bloomberg’s emerging-market debt hedge fund index returned 10.6% in the first three quarters of 2024, while broader distressed debt strategies gained 16%.
The firm’s credit-dominant, multi-asset strategy targets distressed, dislocation, and deep value investments across public and private markets, focusing on Latin America, Eastern Europe, the Middle East, and South Asia.
With approximately £600m in AUM, Sandglass’s investors include endowments, foundations, OCIOs, family offices, and increasingly, pension funds – Kelner links the increased interest from institutional investors with their shifting attitudes toward emerging markets.
Sandglass concentrates on event-driven investments in sovereign and corporate credit, particularly restructurings, turnarounds, and market dislocations. “As many global distressed credit investors shy away from emerging markets, these situations present attractive opportunities to earn superior risk-adjusted idiosyncratic returns,” notes Lozovsky, the firm’s CIO.
The firm’s regional approach varies opportunistically – Latin America offers both sovereign and corporate credit opportunities, while Eastern Europe tends toward corporate debt, and Africa and South Asia have primarily presented sovereign credit prospects.
While not discussing specific positions from last year’s performance, Lozovsky identified several market trends: low asset prices, resilient global GDP growth, and structural reforms across various markets. Argentina’s fiscal adjustment following its election was notable, and fiscal and monetary reforms were noted in Pakistan, Egypt, and other economies. Sri Lanka and Ghana, both in default the previous year, concluded their respective debt restructurings. Ukraine meanwhile, showed economic resilience despite ongoing conflict, as corporate issuers continued to remain current while quasi-sovereign issuers returned to debt service at the conclusion after winning short-term liquidity relief from creditors.
“Market pricing at the start of the year failed to reflect the stabilisation that eventually occurred,” Lozovsky stated.
Looking forward, Sandglass anticipates the weaker EM sovereigns continuing to make fiscal adjustment in the face of more challenging global growth conditions, and a number of opportunities in the restructuring of sub-sovereigns and corporates. The firm also expects potential shifts toward orthodox monetary policy and opportunities in corporate and equity alpha strategies.
For investors interested in distressed situations or emerging markets, Sandglass points to the necessity of local expertise. “Understanding political, economic, and cultural contexts is critical,” says Lozovsky.
Having regional presence – through teams or partnerships – and engaging with key stakeholders including policymakers, regulators, and management teams, are approaches the firm considers essential to navigate these complex markets.
Genna Lozovsky, Co-Founder and the Chief Investment Officer, Sandglass Capital Management – Genna serves as portfolio manager of the Sandglass Opportunity Fund and the Sandglass Select Funds. He has 32 years of investment management experience in special situations and private equity investing, beginning his career in M&A at Credit Suisse in New York. During his career, he was a co-founder and principal of asset management firms focused on distressed credit, stressed credit and equity investing in global emerging markets with combined assets of $3bn, including Salute Capital Management, Delta Private Equity Partners and the Sputnik Funds. Genna has served on the Board of Directors of over a dozen emerging markets companies. He graduated cum laude from the University of Chicago, where he studied economics and statistics. Genna is an American citizen and is fluent in Russian and conversant in French.
Michelle Kelner, Co-Founder, Sandglass Capital Management – During her career, Michelle held senior roles in emerging markets asset management in both business development and investment roles, including as Senior Partner at Prince Street Capital, and other roles at SAC Capital, Tudor Investment and Hermitage Capital. Michelle began her career in investment banking at JP Morgan. Michelle serves on the Advisory Board of the University of Virginia’s McIntire School of Commerce and the Board of the Marks JCH, a Jewish community centre in Brooklyn. Michelle graduated with distinction from the University of Virginia, where she studied finance and economics. She is fluent in Russian and conversant in French.
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