April 1, 2010
In an unexpected piece of news today, a hedge fund that has taken on responsibility for much of Greece’s national debt, is hoping to negotiate a purchase of the Elgin Marbles from the British Museum to add to its asset portfolio.
Greek government in sovereign debt hedge fund deal
Author: Margie Lindsay
Source: Hedge Funds Review | 01 Apr 2010
London, April 1, 2010 – EXCLUSIVE – In a bold and unexpected move the Greek government has transferred its entire sovereign debt into three hedge fund vehicles. A further fund will receive Greek ancient monuments and a fifth ownership of several holiday islands in the Mediterranean, Hedge Funds Review has learned.
The hedge funds, all to be domiciled in the Cayman Islands, will pursue a number of strategies ranging from distressed debt to activist, according to sources close to the deal.
The European Central Bank (ECB) and International Monetary Fund (IMF) both appeared to be unaware of the Greek government’s plans. The ECB is understood to be surprised by the move and has not yet made a statement. The IMF is studying the detail of the plan. Neither has expressly criticised the Greek government’s plan although the ECB is thought to be “disturbed” by the development, according to a source within the bank.
A source at the IMF who requested to remain anonymous said the deal was “breathtaking in its scope” and could be a “blueprint for other endangered eurozone countries” including Ireland’s troubled banking sector.
The three distressed funds will be named after Greek mythological figures in an echo of the securitisation deals that originally created the debt. The funds, which are still being registered with the Cayman Islands Monetary Authority, are: Hades Distressed Sovereign Debt (DSD) Fund, named after the lord of the underworld and ruler over the dead; Ares DSD Fund, named after the god of war considered to be murderous and bloodstained but also a coward; and Hephaestus DSD Fund, named after the only god to be physically ugly and also lame.
Each of the three funds will have numerous sub-funds or special purpose vehicles containing different tranches of the debt. Each sub-fund will have varying minimum initial investment levels ranging from $1 million to $50 million. Fees will vary according to share classes although a 2% management, 20% performance fee will be the basic structure. Longer lock-ins will reward investors by a smaller or no management fee.
Although none of the participating management companies running the funds would go on record about the deal, one portfolio manager revealed the all three funds are expected to use a long/short strategy, going long US Treasuries and Gilts and shorting French and German government debt. “We intend to play hard-ball,” said one manager involved in the transactions.
The funds are also expected to take an active part in further Greek debt raisings this year. The government has so far raised €18 billon out of an expected €53 billion this year. Hedge funds were excluded from the earlier deals but are expected to be allowed to participate in future offerings.
The Greek government remained silent on the deal. However, Hedge Funds Review has learned the government believes the various hedge funds are the most efficient and effective way to manage the country’s debt. “If the eurozone countries won’t commit to helping us, we will find a way to get ourselves out of this mess,” said a Greek official familiar with the deal. “If this means the French and Germans can’t bully us any more, that is all to the good. If this deal results in a soft-landing for the economy and the Greek people, it should be welcomed,” he added.
The activist fund, expected to be named Typhoeus Action Fund, is understood to be eyeing the Elgin Marbles as its first target. Typhoeus was a fire-breathing dragon with 100 heads that never rested. The Elgin Marbles, at present displayed in the British Museum, are a source of irritation to the Greeks who have demanded their return. The British Museum has other fragments from the Parthenon with no connection with Lord Elgin that could also be targets for action by the Typhoeus fund.
The Typhoeus Action Fund has an initial lock-up of three years and thereafter will have monthly liquidity.
The sixth fund, to be known as the Demeter Islands Fund, named after the goddess of fertility, agriculture, horticulture, gain and harvest, has taken ownership of several islands. Some of the package is believed to consist of Alonissos, Andros, Kos, Lefkada, Lipsi, Paros, Paxos and Santorini-Thira with an option on Naxos, Syros and Lesvos (or Lesbos).
The fund will pursue an aggressive environmental strategy coupled with a mixture of event-driven and quantitative directional.
Two of the three distressed debt funds are believed to be run out of the US with the managers for the remaining funds based in London.
None of the five funds has made public who the service providers will be. One source close to the transaction said it is likely that multiple prime brokers will be used.
- The campaign to return the Parthenon Marbles is an appeal to Britain’s “better instincts” : June 15, 2012
- The New Acropolis Museum will re-ignite the Elgin Marbles debate : October 15, 2008
- Greek culture minister rules out legal action over the Elgin Marbles : June 30, 2009
- Filming costs at the Acropolis will be reduced : March 30, 2012
- Getting London to commit to the return of the Parthenon Marbles before the 2012 Olympics : May 11, 2012
- Stephen Fry: “It would be a ‘classy’ move for Britain to return the Parthenon Marbles” : June 13, 2012
- Lack of funds for museums to make new purchases : May 8, 2006
- Could legal action form a solution to the Parthenon Sculptures dispute? : July 16, 2012