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Hedge funds see opportunity in Greek debt crisis

Thursday, June 23, 2011

Robert Marquardt
Opalesque Industry Update – Hedge fund managers attending the annual GAIM conference in Monaco agreed that the worsening Greek debt crisis is an opportunity to make profits, although political uncertainties certainly make it a risky proposition provide risks, various media reported.

Hedge fund executives said the Greek debt crisis provides money-making opportunities, but emerging markets remain a safer haven.

Robert Marquardt, founder of fund-of-hedge-funds firm Signet, was quoted by India Times as saying: "It's certainly a great chance to make money, from the perspective that it's dynamic and rapidly changing, but the political risk is huge. With some Greek debt trading at 40 cents on the dollar, you can assume that recovery value over one or two years will be greater than that. You can hedge that by being short Spain or Portugal -- somewhere that's not really in play."

The comments came after Greek Prime Minister George Papandreou survived a confidence vote on Tuesday after the European Union issued an ultimatum to the Greek government to initiate reforms or lose a €12bn ($17.2bn) aid tranche it needs to avoid going into default.

In the same conference, private equity managers said they were also seeing opportunities.

Veteran venture capitalist Jon Mouton for example told participants of the conference that the crisis has significant impact on European banks.

He was quoted by The Telegraph as saying: "If Greece defaults, whether now or in one year or so, there will be a real chaotic period and all kinds of opportunities will surface you hadn't really thought about. Plausibly, that will result in a lot of financial institutions finding themselves short of capital, and you'll find quite a few things being sold rapidly, and private equity would have the funds to play when other people don't."

Moulton explained that as the balance sheets European banks starts to shrink, hedge funds could take this as an opportunity for their money-making ventures."
Komfie Manalo

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