Junaid Raza Syed (Senior Editor/Department Manager FS)
Global stock markets suffered historic crashes as chaos spread due to the Coronavirus pandemic. The current financial crisis is reminiscent of the credit crunch of 2007-2008 where many traders stood in horror as they watched the financial system collapse. One of the traders who suffered major losses from the crash of 2008 is Loic Fery, the CEO of a London-based credit investment firm, who has made an astonishing comeback and is now up 62% in the middle of this global market chaos.
Fery, the 45-year-old head of the credit investment firm Chenavari Investment Managers, oversees approximately $5.5 billion in assets. Their areas of expertise are tradable credit, private credit, real estate, and leveraged finance. The firm is currently in its 12th year of operation and is considered experts in European credit. With the fall of the global financial markets unfolding, he is well-positioned to capitalize and earn tons of money for the firm.
At the age of 33, he became the global leader of credit markets for Calyon, the investment banking branch of the largest bank in France, Credit Agricole. He was in charge of leading 200 traders to compete against the largest firms in London and New York. He was also considered one of the rising stars in the trading arena in Europe at that time.
However, Fery has not always been lucky in his career. During the fall of ‘07, his career turned upside down when a rogue trader from his team placed an unauthorized trade worth $350 million which resulted in a substantial loss in the banking group’s earnings.
Fery was immediately dismissed by Calyon but was later publicly cleared by the investment bank of any involvement in the trade. Then in 2008, he reestablished his career in the middle of the global financial crisis by building a new firm called Chenavari, a credit-focused investment firm with his former counterpart and co-founder Frederic Couderc.
The duo started with less than $50 million as capital and led a team of traders to generate money betting on a recovery in credit markets in Europe.
In 2015, they went public under the name Chenavari Toro Income Fund that fared well, offering a consistent yield of 10%. In the same year, after realizing that there were few opportunities for them as the credit markets in Europe have recovered, they started to build private credit vehicles that bought portfolios off of restructuring Italian and Greek Banks.
The firm also invested in collateralized loan obligations and proceeded to bring in $4 billion in private credit assets.
After the success of their income fund, Fery and his partners launched a hedge fund called the Chevanavari Dynamic Credit Cycle Fund as a response to the changing credit markets in Europe. The fund positioned to make a profit off of unraveling of markets and increasing yield difference.
Fast forward to 2020, the Chenavari Investment Managers issued a statement to their investors and partners on actions that they will be taking to capture investment opportunities amid the market panic due to COVID-19. Fery also gave his own assessment of the situation on March 17, 2020. He spoke of his predictions based on technical and fundamental analysis in assessing the current situation.
Their strategy is focused on making convex bets or the anticipation that prices of bonds will fall as spreads and interest rates surge. Fery and Couderc betted against bonds that are likely to drop, used credit default swaps, betted against credit indices, and specific structured tranches.
The two founders believed that the credit markets will soon arrive at a peak of turmoil and confidently positioned the Dynamic Credit Cycle fund to “go long”.
Finally, with their prediction based on fundamental analysis and historic data that the equity and bond prices globally will take a plunge, the $400 million fund skyrocketed to as much as 62% net of fees as of this month.