Arini Capital, the hedge fund launched by a star trader known for concentrated bets, lost about 15.7% this year through September in its flagship fund after prices dropped on several of its largest investments, according to people familiar with the matter.
The London-based firm specializes in corporate debt and has been one of Europe's fastest-growing fund managers, amassing around $22 billion since founder Hamza Lemssouguer, a former corporate-debt trader at Credit Suisse, launched it in 2022.
The 36-year-old fund manager is now facing the possibility of his flagship fund's first annual loss unless one or more of its biggest investments turn around in the next few months.
Arini's $7.3 billion flagship fund lost 7.44% in September as prices dropped on bonds and loans it owns in distressed companies such as telecommunications providers Altice International and Brightspeed, as well as carmaker Aston Martin, the people familiar with the matter said.
Altice bond prices dropped about 28% since July as creditors fought owner Patrick Drahi for control while Aston Martin's debt fell a similar amount amid contentious debt restructuring talks.
Known for his math skills and obsession with exotic parrots, Lemssouguer has faced big swings before, given his penchant for taking large stakes in companies in turmoil. The flagship fund lost 16% during its first year before rebounding to a 4% gain and lost about 8% in early 2024 before finishing the year up 20.8%.
In a recent letter to fund investors, Arini said such volatility was to be expected.
"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. "The periods of greatest opportunity can also involve substantial mark-to-market volatility."
The Financial Times earlier reported on the performance of Arini's flagship fund.
Despite the downturn, outside investors continue to buy into Arini's flagship fund. The fund took in $425 million in October, the people familiar with the matter said.
Rising interest rates have intensified pressure on the heavily indebted companies, pushing prices of their debt down and creating bargains for distressed investors. Arini is one of the few such specialists in Europe, where high fuel prices and rising government bond yields in countries like France are straining companies even further.
Arini's funds that lend to more stable companies have delivered better returns than the main fund this year, reflecting strong market demand for debt with credit ratings above the bottom bracket. The firm's credit opportunities fund has returned 9% through September.
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