Hedge funds focused on Europe believe that the sovereign debt crisis is set to spread beyond Greece, to Portugal, Italy, and Spain. Bloomberg News reports that hedge funds are evaluating trades that reflect their pessimism on sovereign debt and its fallout on discretionary consumer spending.
Bruce Richards’ $10 billion Marathon Asset Management LP is doing its due diligence on distressed real estate and corporate debt held by ailing banks in Euro zone countries.
Simon Finch, head of credit trading at the $11 billion London CQS UK LLP, expects consumer discretionary spending to drop as governments in the Euro zone countries tighten spending. In anticipation, Finch expects declining earnings to push bond ratings lower at mobile-phone, toll-road and utility companies as austerity measures kick-in and consumers tighten their wallets.
Nick Swenson of Minneapolis-based Groveland Capital LLC also believes Italy and Spain face more trouble ahead and is betting against their sovereign debt through credit-default swaps. |
