Hedge fund guru sees bargains in Europe debt woes

Date: Friday, April 30, 2010
Author: Laura MacInnis, Reuters

Southern Europe's debt crisis is creating excellent buying opportunities in certain beaten- down stocks such as Spanish and Italian banks, hedge fund veteran Philippe Jabre told Reuters on Thursday.

The controversial former manger of GLG (GLG.N) -- one of London's biggest listed hedge funds -- said he thought investors remained overly risk-averse in a market with plenty of momentum in technology, autos, energy and industrial sectors.

"People are putting too high a probability on risk. They are too scared," he said in his office in Geneva, in one of the few interviews the famed arbitrager has given since he left London. "It is a dream market for a stock picker. It's great."

The hedge fund manager, whose Jabre Capital Partners runs around $5.5 billion in assets, said that governments around the world would eventually have to tackle their debt, which swelled after the 2008 credit crisis spurred costly state bail-outs of financial institutions.

While describing Greece's crisis as "a very bad problem," Jabre said he was confident "a consensual solution on how to address the debt" would be reached before long.

Such an agreement would ease concerns about other debt-laden countries such as Spain and Portugal, whose credit ratings were downgraded this week, and give a lift to several southern European stocks, the Lebanese-born Frenchman suggested.

"There are very big banks that, because they are based in Spain, Portugal or Italy, people don't want to touch them. But they are very cheap," he said, joking: "The closer you get to the Mediterranean coast, the closer you get to hot water."

LOWER TAXES

Jabre, who is about to turn 50, was one of the first hedge fund managers to move to low-tax Switzerland, following his record 750,000 British pound ($1.2 million) fine from Britain's Financial Services Authority for market abuse.

Since then, Geneva authorities have used low tax rates and other incentives to draw in other major funds including hedge fund giants Blue Crest and Brevan Howard, which have installed some staff in the small lakeside city in recent months.

Jabre said funds would continue to move their offices out of London as a result of the higher tax imposed on top-earners in Britain and concerns about the British deficit.

"Some people pay 50 percent (income tax) and they can move here and pay much less than that," he said, estimating that London's share of European hedge funds could fall to 60 or 70 percent, from its current 80 percent.

In January, Jabre Capital Partners said it would close its flagship Multi Strategy fund for two years when it reaches $2.5 billion to ensure returns are not hampered by its size, then estimated at $2 billion.

Jabre said on Thursday that a convertible fund he launched with the Swiss private bank Pictet raised its target of 800 million euros ($1.1 billion) in just five days in February.

Institutional investors are also lining up for a long-only equity Global Balance fund that will be launched in the next three to four weeks, which Jabre said could grow to a maximum of $2.5 billion.