London-based credit investor Arini Capital Management has found itself on the wrong side of Europe's thorniest distressed debt trades, pushing its flagship strategy into loss during a year when two of its top traders have left. Arini, which manages $22bn, has been one of Europe's fastest-growing hedge funds and quickly developed a reputation for using leverage to take big concentrated bets on the debt of struggling corporates. Founded in 2021 by former Credit Suisse high-yield trader Hamza Lemssouguer, the contrarian approach has earned its master fund big profits, gaining 27 per cent in 2023, 21 per cent in 2024 and 10 per cent last year.

But a series of soured bets has driven the 35-year-old Moroccan's flagship fund to a loss of more than 8 per cent since the start of the year, according to people familiar with the matter. The master fund lost almost 8 per cent in July and close to 1 per cent in August, as positions in the debt of companies including Aston Martin and Altice International have deteriorated. Arini was hit by another asset shift in July, when heavily indebted carmaker Aston Martin stripped its most valuable naming and branding rights from the reach of creditors owed more than £1.3bn, causing its bonds to plummet.

Recommended Aston Martin How Aston Martin's latest financing sparked a bondholder revolt Arini is one of the company's largest bondholders, owning hundreds of millions of pounds' worth of Aston Martin's debt. The assets were pledged to private credit firm HPS, as part of a contentious £550mn new financing deal that cut out existing creditors. Alongside its flagship fund, Arini also runs other smaller strategies where performance this year has been better.

Its credit opportunities fund is up 12 per cent year to date and a direct lending strategy has returned 7 per cent so far this year, according to people familiar with the matter. The fund sought to reassure investors in a letter about the July performance, telling them that its expectations about worst-case scenarios and timelines for its positions to come good were unchanged, and that it had doubled down on its highest-conviction trades. It has bounced back from similar mark-to-market losses before.

Arini reminded investors that it shed 8 per cent over two months in early 2024, then gained about 29 per cent over the following 12 months. The fund also lost 15 per cent over a few months shortly after its launch in 2022, but over its first four years, Arini earned a return of 73 per cent.