New York (AFP)

They lost billions of dollars in the financial rout caused by the coronavirus pandemic. Hedge funds, which manage the money entrusted to them by the wealthiest and pension or sovereign funds, are now looking to recover by betting on the current slump.

A significant number of them want to convince their customers that the current economic meltdown and uncertainties constitute a unique investment opportunity, according to internal notes consulted by AFP.

Some have already had discussions with investors and potential new customers, to whom they have hammered that financial assets - stocks, corporate bonds, commodities - have never been so cheap since the subprime crisis of 2008, according to sources familiar with the matter.

"We only raise fresh money when we see opportunities in the markets," said an internal source at Baupost Group.

This hedge fund, which had not approached investors since 2011, recently invested $ 1.5 billion in depressed assets and offers its customers to increase their funds to allow it to be more aggressive.

Contacted by AFP, a spokesperson declined to comment.

- "Biggest risks" -

Hedge funds want to invest in companies rolled up on the stock market and are also interested in unlisted companies that are short of cash.

They are betting that the massive stimulus plans of governments will help the recovery of economic activity and the recovery of markets.

King Street Capital Management has sent a letter, consulted by AFP, to investors, in which the hedge fund says it is looking for "large, high-quality companies whose debts and (requests for) loans have been affected by the debacle".

Citadel, the hedge fund of billionaire Kenneth Griffin, one of the first financiers to warn against the Covid-19, even went so far as to create a specific fund.

Called "Citadel Relative Value Fixed Income Fund", according to a stock market document, this fund aims to take advantage of market volatility, insists Citadel, whose star investment vehicles had suffered losses of 55% during the crisis from 2008.

"This is not a Chinese health crisis. It is a global health crisis," Griffin said on February 6 to the New York Economic Club, referring to Covid-19.

The new coronavirus is, he said, "probably one of the biggest short-term risks facing financial markets around the world".

- Big gains -

Economists now agree that the coronavirus pandemic, which has already killed around 23,000 people around the world, will cause a recession in the global economy.

Many economic sectors are stalled or idling. Airlines are almost on their knees, hotel groups, restaurant chains and companies specializing in shale oil are dying.

According to S&P Global, the rate of US companies in financial difficulty likely to default in the next 12 months should more than triple, from 3.1% in December to 10%.

What makes the hedge fund Saba Capital Management happy, whose founder, Boaz Weinstein, announced to its customers, via a letter, betting on the defaults and bankruptcies of companies considered financially fragile by the rating agencies.

These bets are winning for now because it shows gains of 33% in the month of March alone, according to Mr. Weinstein.

However, it is not certain that all hedge funds have the same baraka, especially since many investors have become cautious and prefer to invest their money in assets deemed safe and not very volatile.

And other hedge funds are also suffering, like Bridgewater Associates, the world number one in the sector, which became famous for succeeding in making money during the 2008 financial crisis.

Bridgewater's flagship investment vehicles recorded historic losses in March, because of failed bets on the continuous rise in the markets, according to a letter sent to customers and consulted by AFP.

© 2020 AFP