Arini flagship fund falls 8% in July on credit losses

Arini Capital Management’s flagship hedge fund dropped about 8% in July after several credit positions went against the London-based manager, erasing most of the fund’s modest gains for the year.

The losses stemmed in part from Arini’s exposure to debt linked to Aston Martin Lagonda. The carmaker agreed a £550 million financing package with HPS Investment Partners to shore up liquidity. That transaction placed new financing ahead of existing bondholders, including a creditor group led by Arini, and pushed down the value of the affected debt.

The firm also lost money on equity tranches of credit-default swaps tied to Virgin Media debt. Those tranches are the first to absorb losses in a credit event and fell in value as market moves worked against Arini’s positions.

Through June the flagship fund had risen 1.37% for the year, so July’s decline erased most of that gain. By comparison, the wider European leveraged-loan market returned 0.09% in July, a much smaller move than Arini’s loss.

Arini was founded by Hamza Lemssouguer, who previously traded distressed corporate debt at Credit Suisse. He left the bank in 2021 and launched Arini in 2022. The firm has grown quickly and now manages about $21 billion, with investors that include Squarepoint Capital.

Since launch, the flagship strategy has produced roughly a 70% cumulative return, though performance weakened at the end of last year when the fund posted losses in the final four months. One person familiar with the results said Arini’s master fund was up about 3.5% for August through Thursday, and its Credit Opportunities Fund was up roughly 12.5% for the year.

A representative for Arini declined to comment. The July decline followed market actions that changed the position of existing creditors and reduced the value of certain credit exposures.