Arini Capital Management’s flagship hedge fund has lost approximately 26% this year as a selloff in Europe’s riskiest corporate debt forces the $21.7bn credit manager to adopt a more defensive investment approach, according to a report by Bloomberg.
The fund, which managed $7.5bn at the end of July, is on course for its first annual loss since founder Hamza Lemssouguer launched the strategy in 2022. Lemssouguer, a former Credit Suisse credit trader, has reportedly reduced new purchases to focus on managing existing positions, withdrawing a significant source of liquidity from Europe’s distressed debt market.
The retreat comes as European triple-C rated corporate bonds face their longest losing streak since 2018, with October potentially marking their worst monthly performance in four years. Rising interest rates, higher energy prices and concerns over corporate creditworthiness have intensified pressure on heavily indebted borrowers, while other credit hedge funds have also suffered losses. Sona Asset Management’s flagship fund declined 3.1% in the first half of October, putting it on course for its worst month since launching in 2016.
Arini’s concentrated exposure to distressed borrowers has contributed to the drawdown, including positions in Aston Martin and Altice International. Aston Martin’s bonds fell from approximately 55 cents on the dollar at the beginning of October to 47 cents by Wednesday, while debt issued by Ritz-Carlton Yacht Collection has dropped below 75 cents from more than 92 cents at the end of September. Some investors have reportedly become reluctant to purchase securities in which Arini holds sizeable positions.
Despite the losses, Arini continues to attract capital, having raised $1.5bn for its credit strategy and reopened the fund to existing investors. More than $400m of the new commitments was allocated at the beginning of October, with the remainder scheduled for deployment through February.
The downturn marks a sharp reversal for a manager whose flagship fund returned 25.8% in 2023, 20.8% in 2024 and 8.6% in 2025. However, some credit investors believe the market dislocation could create opportunities to acquire distressed securities at attractive valuations, even as concerns grow over further losses across Europe’s lowest-rated debt markets.