Hedge fund manager Dromeus Capital Group’s Greek focused fund – Dromeus Greek Advantage Fund – has delivered investors net returns of 107 per cent in its first 12 months.
The fund, which was launched when there was still widespread concerns that Greece would be forced out of the Euro, has been one of the best performing hedge funds of the last year, topping a list of European event-driven hedge funds, in a survey conducted by Bloomberg.
As well as benefiting from a dramatic re-rating of Greek Government bonds and listed equities, the fund has also benefited from its participation in the recapitalisation of the Greek banking industry. Since the recapitalisation of the Greek banks the warrants of the banks Dromeus invested in have appreciated by over 250 per cent.
Dromeus’ larger flagship fund, Dromeus Global Opportunities Fund, has also performed strongly over the last year showing a net return of 29 per cent over the last 12 months. The performance of Dromeus’ main event-driven fund was boosted by a number of idiosyncratic positions such as its investment in piano maker Steinway which was subject to a three-way bidding war that included PE fund Kohlberg & Co and hedge fund Paulson & Co.
Dromeus says that although Greek assets have sharply recovered from their lows there is further upside – considering the 83 per cent collapse in the price of Greek equities that preceded the recovery.
Achilles Risvas, co-founder and managing partner of Dromeus, says: “Launching our fund during that period of extraordinary uncertainty, not only for Greece but for the Eurozone as a whole, may have seemed a risky proposition. It was certainly a non-consensus idea, but the low level of asset prices meant we were absolutely convinced that we had valuation on our side.
“We have made a conscious effort to seek investments that are at odds with the prevailing view, because that is where asymmetrical risk-reward opportunities are to be found. It is that search for investments which are overlooked or misunderstood, which led us to Greece.
“Whilst we are pleased with results achieved over the past year we are by no means in celebration mode – we remain focused on building on the performance we’ve delivered to date.”
The restructuring of Greek Government debt means that interest payments for Greece, as a percentage of GDP, are now below the UK and US. This restructuring has allowed the Greek Government to start paying off its arrears to Greek businesses – creating a fillip for the real economy.
The rehabilitation of Greece over the last year change means foreign investors now make up 35 per cent of the transactions in Greek shares – having almost completely withdrawn from the market. Retail investors and domestic mutual funds are now the only sellers.
Risvas says: “Corporate earnings, economic activity, credit conditions and investor sentiment suggest that we are about mid-way through the trading cycle that follows an economic meltdown of the type that Greece has had to endure.”