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Alternative Market Briefing

Hedge funds, investment firms are offering Puerto Rico recovery assistance

Monday, September 15, 2014

Komfie Manalo, Opalesque Asia:

At least 28 hedge funds and other investment firms are offering unofficial assistance to Puerto Rico, including public relations and even money to the beleaguered government that is faced with high unemployment and concerns from municipal bond investors.

In a report, the New York Times said the hedge funds, including Perry Capital, Fir Tree Partners and others, have formed the unofficial Ad Hoc Group of investors that have poured some $4.5bn into the island and bought roughly 10% of the government’s guaranteed and tax-supported bonds.

Robert Donahue, managing director at research group Municipal Market Advisors, was quoted as saying, "The hedge funds are controlling the narrative, and the government is a willing participant."

The group is looking to make profits when the value of their bonds rise up after buying them up at a discount when mutual funds and wealthy individuals unloaded their holdings at the first sign of financial trouble in Puerto Rico.

But this time, the hedge funds are looking at a brighter prospect as the more successful their PR campaign is and paints Puerto Rico as a rosy destination, the more likely their bond holdings would gain in value.

One of the buyers of Puerto Rico’s junk rated bonds is Franklin Resources, which is ......................

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