LONDON, Nov 12 (Reuters) - Former Credit Suisse bond trader Hamza Lemssouguer's main $3.7 billion fund at Arini jumped 23.4% through the end of October, benefiting from bets against European manufacturers facing U.S. and China headwinds, said a source and an investor letter.

The year-to-date gains beat recent industry averages for hedge funds trading corporate debt, which have returned 9% over the same period, and distressed players, which are up an average of 11.5%, according to hedge fund research firm PivotalPath.

The Arini Credit Master Fund made short bets centered on how electric vehicles and satellite companies in Europe will likely be squeezed between increasing U.S. protectionist measures and China's ability to mass-produce at low costs, according to a September letter sent to investors and seen by Reuters.

The fund, which takes both long and short bets on the value of bonds as well as options bets aimed at protecting and profiting from macro-economic swings, has yet to send its October update.

A short position takes the view that an asset will weaken in price.

Bonds issued by companies in the satellite industry traded lower in September with some falling as much as 10% on news that Elon Musk's Starlink won two major contracts with United Airlines and Air France, according to the September letter.

Starlink's European competitors are facing a powerful challenger whose CEO is expected to benefit from the backing of U.S. President-elect Donald Trump.

"We remain concerned at the level of debt the legacy geostationary satellite companies are carrying into a period where they need to defend market share despite an inferior product and higher pricing," the letter said, also pointing to a "swath of profit warnings" from European auto companies during September.

Waning European consumer demand, fading government stimulus, 'cratering' used electric vehicle prices and high labour costs will all pose further detriments to the industry, it said.

Europe's weakness, despite any fiscal easing it might employ, will continue to stem from having to pay for commodities which are primarily priced in U.S. dollars.

The dollar has gained since Trump secured election victory last week, particularly against the euro, which has fallen almost 3% to touch a 7-month low around $1.0617 on Tuesday .

Arini, which oversees $6.7 billion, had returned 7.8% in its $375 million Arini Structured Credit Equity Fund by end-October, according to a person with knowledge of the matter who declined to be named because the details are private.

Arini was originally spun off from Squarepoint but is now fully independent. It trades the high-yield and distressed debt of global companies but concentrates on its European expertise guided by London-based founder Lemssouguer who started the hedge fund in January 2022.

A spokesperson for Arini declined to comment.

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https://www.reuters.com/markets/europe/bond-hedge-fund-arini-up-234-betting-against-european-satellites-autos-says-2024-11-12/