Gramercy Advisors LLC, the $3.2 billion emerging-markets hedge fund, started a distressed credit fund with $200 million in commitments, according to a letter to investors, a copy of which was obtained by Bloomberg News.
The Gramercy Distressed Opportunity Fund II invests in stressed performing, distressed and defaulted emerging market corporate and sovereign debt, Robert Koenigsberger, managing partner and chief investment officer at Greenwich, Connecticut- based Gramercy, said in the letter, dated yesterday.
The firm sees opportunity in the $1.8 trillion of emerging- market bonds and loans coming due by 2016, a quarter of which are non-investment grade, or junk, Koenigsberger wrote. Investors fleeing from risky global assets in light of the European sovereign-debt crisis are likely to avoid the debt, according to the firm.
“High-yield issuers in emerging markets will experience severe liquidity challenges over the next several years as the capital markets continue to eschew riskier corporate credit and banks in the developed markets continue to reduce their lending appetite,” Koenigsberger said in the letter. “Investors who want to profit from the problems in Europe should look at those risk assets that have re-priced but have nothing to do with Europe.”
Steve Bruce of ASC Advisors LLC, a spokesman for Gramercy, declined to comment on the letter.
After “being approached by investors seeking uncorrelated investment returns from emerging markets,” Gramercy started taking money for the new fund on June 17, Koenigsberger said in the letter. The Gramercy Distressed Opportunity Fund II started investing in June and produced an 11 percent gain on drawn capital as of Oct. 31.
The fund will remain open to investments through next June, Koenigsberger wrote. No fundraising target or limit was specified.
Robert Rauch, a partner at Gramercy and co-portfolio manager of the firm’s predecessor fund, Gramercy Distressed Opportunity Fund, is managing the new fund with Koenigsberger, according to the letter.
Gramercy started the first fund in 2009. It produced a 14 percent annualized return with 7.3 percent volatility and a 1.82 Sharpe ratio during its three-year investment period that ended on March 31, Koenigsberger said in the letter. The fund is returning capital to investors.
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