Some of the world's leading hedge funds are pouring money into the Greek banking sector in expectation of potential returns, even as the country struggles to right its economy in the face of deep government spending cuts.
The hedge funds are among the largest institutions involved in a €550 million share issue from Alpha Bank, Greece’s second-largest lender, set for completion in mid-June, said people familiar with the plans.
Some hedge fund managers believe a wager on the country’s banks could prove even more lucrative than other bets on the recovery of Greek markets. “This is the mother of all recovery trades”, said Achilles Risvas, the managing partner of Dromeus, which launched a Greek-focused hedge fund last year. “The situation is hugely attractive because of the asymmetry of the pay-off.”
The private sector investment in Alpha Bank is to be matched by a €4 billion cash injection by the EU-backed Hellenic Financial Stability Fund. Hedge funds have been lured to participate because of the potential returns they can make through special warrants attached, for free, to the new issue of bank shares.
Although Greek authorities hope to repeat the success of Alpha Bank’s fundraising with other banks, hedge funds are more cautious. Some are looking at participating in the parallel Piraeus Bank recapitalisation. But many say the case is different for the National Bank of Greece, a more likely candidate for near-total nationalisation.
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