(Reuters) – The steep sell-off in Greek assets is tempting some investors – including hedge funds – to wager the crisis-hit country’s bond and stock markets offer a bargain.
Dromeus Capital, which specialises in emerging markets, has launched a fund to bet on the country by buying government debt and the bonds and shares of companies it believes will best weather a recession that has cut the economy by a fifth.
Achilles Risvas, Dromeus’ chief executive, said on Friday this was “the ideal environment” for bargain hunters.
“The huge uncertainty and political instability has caused investors to sell down Greek assets to prices from which the likelihood of further declines is limited,” he said.
Greece’s stock market has plunged more than 80 percent since the financial crisis started, taking it back to 1993 levels and valuing companies at five times earnings, versus an average of 16 across the euro zone, Dromeus said.
“Our trade ideas do not fit, in our view, in the prevailing perception that dictates Greece is “un-investable” and a synonym for bankruptcy,” the firm said.
The Dromeus Greek Advantage Fund will invest in government debt, stocks and corporate bonds with an initial weighting towards debt.
Dromeus is among a number of funds returning to Greek assets. Greek government bonds have doubled in price since the summer, when an imminent departure from the euro zone seemed possible.
London-based hedge fund Adelante made a 70 percent gain on a sale of the bonds it bought in June.
Greece’s government voted by a razor thin margin on Thursday to approve an austerity package needed to unlock vital aid and avert bankruptcy, despite violent protests and a two-day national strike called by trade unions.
Euro zone ministers, however, are yet to make a decision on how to make the country’s debt sustainable.
“You shouldn’t get too carried away with it, but progress is being made towards deregulation of the economy, towards privatisations and towards cost cutting within the public sector,” Risvas said.
The fund’s size will be capped at 200 million euros because of current liquidity constraints in Greek markets.
The firm declined to say how much it has already raised but said it is close to reaching its 200 million euro target after attracting capital from asset managers, private banks and family offices.
Dromeus, which has offices in Geneva and Athens, was founded by Risvas and Jason Manolopoulos in 2008.
By Tommy Wilkes to Reuters