Spanish Hedge Fund Up 93% On Southern European Bets

Oct 30 2013 | 11:48am ET

Hedge fund Armada Capital's bet on southern Europe's recovery from the financial crisis is finally paying off.

The Madrid-based fund, whose hometown saw some of the worst unrest unleashed by the financial crisis and the bitter pills taken by countries like Spain to combat it, is up 93% this year, Financial News reports. The fund has been buoyed by the strong performance of southern European stocks in spite of the unstable Italian political situation, the March bailout of Cyprus and fears—now proven unfounded—of an early start to the U.S. Federal Reserve's bond-buying taper.

The markets' resilience shows that they "were buying into euro sustainability and peripheral comeback," Armada founder Fernando Primo de Rivera told Financial News.

"We held onto our positions on the belief that Germany wouldn't let the euro collapse because it was the main beneficiary of the single currency," he said. "A euro breakup was unthinkable because of the havoc it would wreak on global financial markets and the blow-out of a political project that had been a success for 50 years."

The €10 million Armada Lynx Fund, which launched in 2010, had lost 32% between its inception and the end of last year.

Armada's portfolio is a concentrated one, and even though the fund is a long/short vehicle, Primo de Rivera has been running it as an "enhanced long-only play," boosting its equity exposure to 120% this summer.

With the success, Primo de Rivera, a former managing director at hedge fund Amber Capital, is looking to garner some additional assets. He's looking for a seed investor willing to offer €20 million to €30 million in exchange for a share of revenues, hoping that the fund's increased size will attract further investors and improve returns, which he says have been cut by eight to 10 percentage points due to administrative costs.


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