Tuesday, May 19, 2020

"Hedge Fund That Timed Big Short, Crypto Rally Eyes Venezuela "

From Bloomberg:
Venezuela’s bond market has been rocked over the past few years by defaults, sanctions and a collapse in crude oil prices. Yet the disastrous cocktail is attracting hedge funds including London’s Altana Wealth Ltd. that say the situation can’t get any worse.

Altana is pitching the South American nation’s government notes, which can be bought at pennies on the dollar, as the “trade of the new decade,” according to two letters to investors seen by Bloomberg.
In one of the letters, founder Lee Robinson said he plans to launch a Cayman Islands-based portfolio next month to capitalize on Venezuelan bond prices that he says could eventually multiply tenfold. He compared the risk-reward to returns delivered during the dot-com craze of the 1990s, shorting sub-prime mortgages before the collapse of that market in 2008 and riding the cryptocurrency rally in recent years.
“At these levels, the downside is low and the upside is the best we’ve ever seen for a sovereign debt restructuring,” Robinson and his colleague Steffen Kastner wrote in one of the letters.
A spokesman at Altana declined to comment.
Robinson, who previously worked for hedge fund billionaire Paul Tudor Jones, has a track record with opportunistic wagers. In 2014, he started a digital currency fund, which rode a rally in Bitcoin to four-digit returns.
Altana manages about $300 million across a number of funds including currency and distressed debt money pools.
Only a small pool of investors have both the patience and the legal ability to make the trade. Sanctions imposed by the Trump administration last year prevent U.S. funds from buying Venezuelan debt. That means firms from Europe to Latin America and the Middle East are the primary buyers, oftentimes through vehicles domiciled in the Cayman Islands for tax purposes.....

I once told a wealthy investor that a certain situation had to have bottomed, it couldn't get any worse.
His reply?
"That statement indicates a lack of imagination"