Arini Capital faces credit-market sell-off as flagship fund drops 26%

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Arini Capital flagship fund drop

Highlights

Arini Capital's flagship fund dropped 26% due to concentrated debt bets in lower-rated borrowers like Altice International and Aston Martin amid a speculative-grade credit sell-off.
Pressure from margin calls forced Arini to seek new capital and sell large positions in distressed debt as bond prices deteriorated across markets.
Despite managing $22 billion and expanding to a 40,000-square-foot office in London set to open next year, Arini faces headwinds from worsening corporate credit conditions.

Fund losses deepen amid concentrated debt bets

As reported by Financial Times, Arini's recent setback is tied to weakening positions in the debt of lower-rated borrowers including Altice International and Aston Martin, as a broader sell-off hits speculative-grade credit. The firm's strategy of taking large, concentrated positions had previously helped drive strong returns and rapid expansion after its 2022 launch with $1 billion of capital.

Arini now manages $22 billion across multiple strategies, but the same high-conviction approach is now amplifying the effect of deteriorating bond prices. Pressure has also increased from margin calls by banks that provided leverage, prompting the fund to bring in new money for its main vehicle and begin offloading large blocks of bonds in distressed issuers.

A person close to Arini says it is business as usual for the firm, adding that it regularly adjusts positions and is using the new capital for several purposes. The firm has also told investors that it has previously recovered from periods of significant mark-to-market volatility.

Expansion plans meet tougher market conditions

The downturn comes after a period of unusually fast growth that had already pushed Arini to expand its physical footprint in London. By early this year, Hamza Lemssouguer had concluded that the hedge fund's 6,400-square-foot Mayfair office was no longer adequate for the size of the business.

In June, Arini agreed to lease the former London office of Apollo Global Management, taking all eight floors and the basement of the 40,000-square-foot building near Hanover Square. The fund is scheduled to move into the new premises next year, by which time it will be seeking a recovery from the current stress in corporate credit markets.

Europe’s uneven growth outlook and its impact on credit conditions was the focus of our earlier coverage. We noted that while IMF forecasts pointed to improving prospects in Germany and the UK and relative strength in Spain, persistent inflation risks and tight fiscal limits were still shaping borrowing conditions and credit sentiment—especially in weaker areas such as France.

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