Former Credit Suisse star trader Hamza Lemssouguer guided his hedge fund to double-digit gains last year, making it one of the best-performing credit money pools.
His $2.7 billion Arini Credit Master Fund returned 32%, said a person with knowledge of the matter. The $544 million Arini Structured Credit Equity Fund, which Lemssouguer started in May, gained 26.7%, said the person, who asked not to be identified because the details are private.
In comparison, credit hedge funds tracked by Bloomberg returned about 8% on average last year.
A spokesperson for the London-based firm declined to comment.
Arini’s gains were largely driven by bets that borrowers who raised money during the easy-money era would struggle to refinance their debt in time after central banks around the world cranked up interest rates over the past year to tame inflation. Around $710 billion of junk bonds are set to mature globally between 2024 and 2026, offering lucrative trading opportunities for hedge funds willing to take risks.
“The upcoming maturity wall and fundamental challenges are likely to continue to present opportunities for our long and short investments,” Lemssouguer wrote in a December investor letter, which was seen by Bloomberg News. Sectors of interest include consumer, health care, chemicals and travel, he said.
Europe’s high-yield market delivered strong returns in 2023, helped by a late-year rally that boosted performance in November and December as optimism soared on expectations of nearer-term interest-rate cuts.
Lemssouguer, 33, made a name for himself at Credit Suisse with stellar returns from large, risky bets on high-yield debt and credit default swaps. He started Arini Capital in 2022 with about $1 billion from investors including Squarepoint Capital. Firmwide assets have since grown to $3.7 billion.
Arini has previously said it plans to add positions in so-called amend-and-extend deals that allow borrowers needing some wiggle room to tweak their deal terms and lengthen maturities. Money managers are keen to tap into such trading opportunities as borrowers face a mammoth maturity wall in the next two years.
The Arini Credit Master Fund suffered some setbacks, too. In November, it marked two stressed positions close to zero and ended the month down 3.2% before rebounding in December, according to the investor letter.
Lemssouguer’s firm is among the largest owners of the bonds of Signa Development, a unit of the struggling property firm Signa Holding GmbH, Bloomberg News reported in November. The hedge fund is part of a group that holds about €150 million ($164 million) of the debt.
The notes lost most of their value late last year as it became increasingly likely that key pillars of tycoon Rene Benko’s Signa group would collapse into insolvency. The bonds are quoted at almost 6 cents on the euro, according to data compiled by Bloomberg, although Arini added many of the bond positions at prices well below par.
Read More: Insolvencies pave way for messy restructuring of Benko’s empire
Arini — named after the parrots Lemssouguer breeds — is also building out a collateralized loan obligation business in Europe and is working on opening two CLO warehouses, a type of credit line used to buy leveraged loans and repackage them into bonds.
During his time at Credit Suisse, the Moroccan-born Lemssouguer generated a gross annualized return of 38%, including 81% in 2019 and 44% in 2020, according to a previous Arini fund document.