Hamza Lemssouguer, founder of Arini Capital Management, is facing an unprecedented setback as the riskiest corner of the European junk-debt market he has dominated for years slumps. Arini's flagship fund, which had $7.5 billion in assets under management at the end of July, was down 12% for the month through Oct. 23 and around 26% so far this year, according to a person familiar with the matter. That puts it on track for the first annual loss since Lemssouguer started trading for the fund in 2022. Formerly a star money manager at Credit Suisse, Lemssouguer has shifted to a more defensive stance, managing existing positions while bidding less actively to add to holdings.
The withdrawal of buying power from Arini, one of Europe's fastest-growing hedge funds, has intensified investor fears about a junk-debt market already facing headwinds. Rising global interest rates, higher energy prices, concerns about France's fiscal health and threats from artificial intelligence have hammered a Bloomberg index of triple-C rated European corporate bonds for four straight months through September. October is shaping up to be the most brutal one-month period in four years. Other credit-focused firms are also struggling, including Sona Asset Management, whose main hedge fund is down 3.1% in the first half of October.
Smaller firms are increasingly avoiding weaker credits in which Arini may hold large stakes. A $300 million bond due in 2028 from Ritz-Carlton Yacht Collection has tumbled to less than 75 cents on the dollar, from more than 92 cents at the end of September. Some investors in the US have even sought out short bets against securities partly because Arini was a creditor.
Despite the losses, Arini raised $1.5 billion in new cash for its credit strategy and has reopened the fund to existing clients. Arini did not respond to requests for comment.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing