London credit hedge fund Arini’s losses mount
Master fund sheds estimated 7% in October, taking decline for the year to more than 21%
Arini Capital Management’s under-pressure hedge fund has shed another 7 per cent this month, exacerbating losses in the fast-growing London credit specialist’s marquee strategy.
Arini, which has grown to a $22bn-in-assets firm in just five years, has told investors it estimated it had lost 6.91 per cent in its master fund between the start of October and end of last week, according to people familiar with the matter.
The continued run of losses meant that Arini’s roughly $7bn fund is now down more than 21 per cent for the year, the people added. Arini previously communicated that its main hedge fund strategy had lost 15.7 per cent between the start of the year and the end of September.
The losses are some of the biggest at a major credit hedge fund this year and mark a reversal for a firm that rapidly drew in money from sovereign wealth funds and large endowments for its market-beating returns in previous years.
Arini, which was founded by former Credit Suisse star trader Hamza Lemssouguer in 2021, has built large positions in several troubled companies whose bonds and loans have crashed in value as lenders prepare for bruising restructuring negotiations.
Bonds that it owns at companies including struggling telecommunications companies Altice International and Brightspeed, as well as British luxury-car maker Aston Martin, have continued to trade lower in the secondary market this month.
Arini also holds a smaller position in bonds at German property group Adler that have crashed from face value to less than 60 cents on the euro over the past month, according to people familiar with the matter. Proposals from politicians in Berlin to nationalise the assets of large landlords have driven the slump in the long-troubled company’s bonds.
Arini’s master fund accounts for about $7bn of its assets, with performance in other funds specialising in asset-backed lending and private credit faring better.
On Wednesday, Arini announced it had closed its inaugural direct lending fund, which has a “strategic sourcing alliance” with financial advisory firm Lazard, targeting a “deployment of over $4bn”. It also recently raised $1.5bn for its flagship fund, with $425mn coming in early October. The remainder is to be allocated by early 2027, according to people familiar with the matter.
Arini has sought to reassure investors over its performance in recent weeks, telling them that it had previously bounced back from significant mark-to-market losses to achieve market-beating returns.
“We do not believe it is an indicator of soured investments, but rather part of the process — being contrarian is a necessary condition for this opportunity set,” Arini wrote in a letter to clients earlier this month, adding that press reports describing its lossmaking positions as “soured bets” were a “miscategorisation”.
The FT reported earlier this month that Arini’s flagship fund had suffered losses after enduring a string of soured bets.
Arini also provided investors with a summary of its “valuation process, fund liquidity profile, and internal controls”.
Arini did not respond to a request for comment.