Hunting for Greece’s Hidden Gems

Naftilia wants to find healthy companies obscured by the crisis | “We are one of the few people out there feeling optimistic”

Jesse Westbrook

Elliott opened an office in Athens to scout for stocks


George Elliott is used to being treated as a curiosity. As founder of Naftilia Asset Management, the financier is raising money for a hedge fund that plans to buy nothing but Greek stocks. In March he met in London with an investment manager who within seconds of sitting down made it clear that he had no interest in wagering on Greece. He just wanted to hear about the hedge fund’s strategy, Elliott says.

Elliott responded by asking a few questions of his own, including whether the money manager had invested in Russia after its 1998 currency crisis, in Argentina 10 years ago after the nation defaulted on its debt, or in the Standard & Poor’s 500-stock index in March 2009 when the benchmark plunged to its lowest point in 13 years. In all cases, the answer was no. “Then you are not qualified to be discussing Greece with me because you have missed the best investment opportunities over the past 20 years,” Elliott says he retorted.

The money manager eventually agreed to invest in Naftilia’s Greek Opportunity Fund, says Elliott, declining to identify his new client. Once he starts talking about specific stocks, “then people start to get excited,” says Elliott, who’s been fundraising since October. “At the same time, we are extremely lonely. We are one of the few people out there feeling optimistic.”

Hard to imagine why. Greece is struggling through a fifth year of recession and has an unemployment rate of 21.9 percent. The Athens Stock Exchange has plunged 90 percent since the end of 2007. “There’s a huge uncertainty about the clarity and the sustainability of earnings” for Greek companies, says James Butterfill, a global equity strategist at Coutts & Co. in London. “If you have a very high-risk profile, then maybe you can pick out opportunities.”

Even so, Elliott, 39, has raised more than €50 million ($63 million) for the fund, according to a person with direct knowledge of the matter. He has not put any of that money to work, while waiting for the Greeks to get a government in place. On June 20 Antonis Samaras, leader of Greece’s New Democracy party, was sworn in as prime minister after political leaders agreed on a coalition that will seek relief from austerity measures tied to international loans.

After studying money management at City University London, Elliott started his finance career in 1997 as an investment banker at Société Générale. Naftilia manages about $400 million and runs hedge funds focused on the global shipping and nuclear energy industries. Naftilia’s main shipping fund, started in 2004, rose 29 percent in its first year and gained in the three following years before dropping 26 percent in 2008 and 20 percent last year, according to a person briefed on its performance, who was not authorized to speak publicly. Elliott was based in Dubai until he decided to open an office in his native Athens in October 2010. He has spent the past year and a half examining corporate balance sheets, building a network of contacts in government and the business community, hiring analysts from banks, and meeting with investors.

Elliott says he’s focusing on companies punished by the stigma of being in Greece that generate most of their business outside the country, and companies whose cheap share prices may make them attractive takeover targets. He will avoid banks. “When Argentina defaulted, they had incredible returns on the stock market but incredible volatility on the currency as well,” says Elliott. “If Greece remains in the euro, we think this is going to be an incredible investment opportunity.”

If Greece returns to the drachma, which Elliott says is very unlikely, investors can buy stocks even more cheaply. “If we go to the drachma again, there will be tremendous amounts of money to be made for speculators,” he says. That would also create hardship for Greeks. The National Bank of Greece estimates per capita income would drop by at least 55 percent in euro terms after the introduction of a new currency. “Whether we are going to take advantage of such a situation and try to make money on the back of a population that is really going to have a tough time is going to be a tough debate for me,” says Elliott. “I don’t know whether I would be able to do it.”

The bottom line With the Greek market down 90 percent since the end of 2007, Elliott has raised more than $63 million to invest in stocks.


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