Unstructured Finance

Greece to welcome hedge funds?

Interesting report in the Telegraph that debt-laden Greece may have to turn to hedge funds for support in its next dollar bond issue.

Having effectively tried to exclude them from recent issues, a u-turn looks likely if it wants to raise anything like what it hopes, the paper says.

Such a report will no doubt be seized upon by the hedge fund lobby, who argue that hedge funds often step into markets as buyers when liquidity is scarce.

And it will be fascinating to hear any reaction from European politician Poul Nyrup Rasmussen, who in a visit to London last month accused hedge funds of raising Greece’s borrowing costs by 2.5 percent (a charge, it must be said, that was vigorously denied by the industry).

Rasmussen told a conference that “we cannot live with it (hedge fund speculation on CDS) anymore” and called for a ban or at least a limit, while a number of politicians have criticized hedge funds who buy the CDS without owning the underlying bond.

Hedge funds: Greece is the word

This week’s Reuters Hedge Fund and Private Equity Summit gave us some new insights into how hedge funds are betting on Greece’s debt crisis and their attitude to talk that politicians and regulators may clamp down on their activities.

According to Cheyne Capital, for instance, buying Greek CDS is an “old trade” that many hedge funds have moved out of. Many have instead moved to short bets on the euro, as the single currency comes under pressure from the debt of some southern European countries.

Then again, two managers from GLG, ranked by Eurohedge this week as Europe’s 6th biggest hedge fund firm, said they are actually long the euro.