Basel III Regs have been good for Davide Serra and Eric Halet's Algebris CoCo Fund
|November 19th, 2012||
|Capitalizing on the more stringent capital requirements under Basel III regulations, the Algebris CoCo Fund has converted its bet on bank-issued debt securities into huge gains thus far in 2012. According to the Financial Times, the $900 million London-based Algebris CoCo Fund has gained 45 percent year-to-date from its portfolio of contingent convertibles, also known as cocos, which are complex debt securities issued by European banks as a hedge against declining capital ratios. The high-yielding bonds convert to equity when a specified event, such as a natural disaster or a stock market crash, adversely affects a bank’s balance sheet and its capital ratios. Because cocos are difficult to value, they require the sophistication and expertise of hedge funds such as the Algebris CoCo Fund to manage them. |
Algebris Investments is a financials focused hedge fund firm that was founded in 2006 by Davide Serra and Eric Halet. Prior to founding the firm, Mr. Serra served as head of bank research at Morgan Stanley, while Mr. Halet was previously an associate partner at Wellington.
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