Helikon Hedge Fund Gains 24% With a Bet on Undervalued Equities
(Bloomberg) -- Helikon Investments, the hedge fund started last year by veterans from Julius Baer Group Ltd.’s Italian subsidiary, returned 24% through the first three quarters of 2021, by betting on overlooked and undervalued equities.
The gains for the 1.17 billion-euro ($1.36 billion) Helikon Long Short Equity Fund follow last year’s 68% advance, disclosed in documents sent to investors and seen by Bloomberg.
A spokesperson for the investment firm declined to comment.
The year-to-date returns through the end of the third quarter beat the 11% rise for the Bloomberg Equity Long/Short Hedge Fund Index and the 14% gain from the Stoxx Europe 600. The fund focuses on value-driven stock investments in European companies with “opportunistic” credit exposure.
Some of Helikon’s top long equity positions at the end of September included the Greek lender Eurobank Ergasias Services and Holdings S.A., which is up 56% this year, and Turkish lender Turkiye Garanti Bankasi A.S., which is down 12% for the year but up about 38% since hitting a low in April. Greece’s largest electricity provider Public Power Corp. is also among the biggest holdings with a gain of 26% this year.
As of the end of the third quarter, the fund’s net long equity exposures included a 43% allocation to Greece, 40% to the rest of the world and 31% to Turkey, in addition to short positions in French and German shares, among others. The financials sector dominated long sector exposure with 52%, followed by materials at 31%. Some of the biggest short equity positions were 22% in the SPDR Gold Trust ETF and 6.3% in industrials.
September was Helikon’s worst month of returns so far with a 7.7% dip. In a statement to investors, the team said the last week of the third quarter erased almost all the gains for July and August, and said their timing for Turkish and gold mining positions was “totally wrong.”
The top long positions that slumped in September included gold miners Eldorado Gold Corp. and Centerra Gold, Turkish conglomerate Haci Omer Sabanci Holding AS. and the Garanti bank.
“However, both groups remain the best risk/reward situations we know of,” said Helikon managers in the quarterly investor letter. “In the context of an environment of significantly negative real rates we continue to be attracted to opportunities located in niche geographies, i.e. overlooked or simply avoided by the majority of investors, that require a longer than average time horizon of six to 18 months.”
The broader market’s preference for top-quality developed-market businesses carries an “oversized” risk because of high valuations, they said.
The fund, which has offices in London and Milan, was started in April 2020 by a team that oversaw the Kairos Pegasus Fund S.A., and is managed by Chief Investment Officer Federico Riggio, Michele Fiumara, David Grazzini and Vittorio Villa. Helikon is closed to new investments, according to the document.
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