Lansdowne Partners LP, the largest European hedge fund that invests in stocks, wagered on Greek and Italian stocks in the first four months of the year as the worsening sovereign-debt crisis sent many investors fleeing from the region.
The firm used one of its funds to take long positions, or bets that stocks will rise, in Piraeus Port Authority SA, the operator of Greece’s biggest port, Thessaloniki Port Authority SA, which operates the country’s second-largest harbor, and Intesa Sanpaolo SpA, Italy’s second-biggest bank, according to a presentation obtained by Bloomberg News. The firm raised its outlook on Europe to “mixed” as of May 1 from bearish three months earlier, London-based Lansdowne said in the presentation.
Lansdowne, the $11.6 billion hedge fund founded by Steven Heinz and Paul Ruddock in 1998, is betting on riskier parts of the European market as investors in the region have rushed to the safest assets amid growing concern that Greece will be forced to leave the euro area. Greece’s ASE Index has plunged 26 percent this year and Italy’s benchmark stock index, the FTSE MIB Index, has fallen 15 percent.
Lansdowne posted a 1 percent loss this year through April in the A Class shares of its European Hedge Fund Strategy, after falling 13 percent last year, according to the presentation. The strategy, which started in 1998 and is run by Heinz and David Craigen, can bet on or against securities including stocks, commodities and derivatives, according to the presentation, dated May 2012. The portfolio has $2.2 billion in assets and is 79 percent invested in Europe, 21 percent in Brazil, Russia, India and China and 7 percent in other areas.
“Lansdowne does not make any public comment about their individual investments or investment decisions,” Andrew Honnor, a spokesman for the firm, said in a statement. “Lansdowne cannot confirm the authenticity of the material which has been published by Bloomberg and does not condone the publication of the information,” he said.
Hedge funds on average gained 1.7 percent this year through April and fell 5.8 percent last year, according to the Bloomberg Aggregate Hedge Fund Index.
Piraeus Port rose 27 percent this year through April before falling by the same amount in May. Thessaloniki Port climbed 24 percent in the first four months of the year and sank 14 percent in May. Last month, Greek stocks fell 25 percent as investors speculated that the Mediterranean nation may leave the euro area and political leaders failed to form a national-unity government.
Intesa Sanpaolo declined 12 percent in the first four months of this year and another 12 percent in May as investors worried about the health of European banks following a Greek withdrawal from the euro. Last month, Moody’s Investors Service downgraded 26 Italian banks, including Intesa Sanpaolo.
Other long positions in Lansdowne’s European Hedge Fund Strategy include Anheuser-Busch InBev NV, Deutsche Post AG, Coal India Ltd. and China Resources Enterprise Ltd., the firm said in the presentation. The fund is 39 percent net long, calculated by subtracting the percentage of a fund’s short positions, or bets on falling prices, from its long wagers.
Lansdowne became bullish about the U.S. market environment in the European Hedge Fund Strategy as of May 1, compared to the previous three months, the firm said in the presentation. The fund also turned positive on U.S. financials as of May 1 compared to three months earlier.
The European Hedge Fund Strategy’s short positions are in businesses that have accounting and governance concerns, food retail, levered Japanese companies and Turkey, Lansdowne said. Its hedges, or offsetting trades, include put options on Germany’s DAX, which gain in value if the benchmark falls, a Hungarian foreign exchange option and futures of an unnamed Indian index. A put option is a contract that gives the owner the right to sell an underlying asset for a fixed price at a future date.
Lansdowne has at least two other funds that were mentioned in the presentation, the Developed Markets Strategy, formerly its U.K. strategy, which started in 2001 and has $8.1 billion in assets, and the Global Financials Strategy, which began in 2004 and has $1.3 billion.