(Bloomberg) — Macro trader and hedge fund manager Greg Coffey is looking for fresh reasons to invest in Turkey and visited the country in recent weeks for talks, according to people familiar with the matter.
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Coffey, founder of Kirkoswald Asset Management LLC, held meetings with bankers and economists in the country in late September to inform investment ideas, according to the people, who asked not to be named because the meetings were private. A representative for Kirkoswald declined to comment.
The meetings followed a rough August for macro-focused carry traders, who borrow money in countries where interest rates are low and put it to work in places where rates and returns are higher. The Japanese yen, long a favorite currency to borrow for carry trades, was climbing that month as the Japanese central bank looked poised to hike rates, which triggered a selloff across emerging markets including Turkey.
Making matters worse, rumors were circulating at the time in Turkish media that Finance Minister Mehmet Simsek, architect of the nation’s markets turnaround since 2023, had offered to resign, putting extra pressure on the Turkish lira, which dropped almost 3% against the dollar. Simsek and Turkey’s presidency denied those rumors.
Bullish Views
Coffey wanted to see the situation in Turkey for himself and was briefed by people who expressed primarily bullish sentiments, people familiar with the meetings said. Some told Coffey that volatility in the lira should be temporary and that current policies were on course to be effective in the fight against inflation.
With a benchmark interest rate at 50% and a government committed to keeping the lira relatively stable, Turkey has returned to large investors’ radar screens this year. Under Simsek, the country has prioritized reopening the market to foreign funds, most of which pulled their money out during Turkey’s years-long experiment with unconventional economic policies based on ultra-low interest rates.
The Kirkoswald Private Credit Fund, which Coffey is incubating to diversify his investment-management business, announced a secured loan in August to a Turkish textiles company, Altinyildiz, the fund’s first private-credit investment deal.
Since March, Turkey has attracted more than $20 billion in carry-trade inflows, according to Bloomberg calculations based on data from the central bank and the banking regulator. Local-currency bonds have also attracted more than $10 billion in overseas investment, while interest for equities remained subdued.
Turkish lira bonds have come under renewed pressure since last week after inflation data for September was higher than forecast, delaying expectations of interest-rate cuts into next year. But that means a policy mix favored by foreign investors is more likely to remain intact: tight monetary policy backed by real currency appreciation.
Risk Management
Coffey’s New York-based firm, which mostly focuses on macro trades in emerging markets, barely made any money last year, ending a four-year run of double-digit returns.
At the Sohn Investment Conference in New York in April, Coffey, 53, said his strategy had changed as he got older to focus more on not losing money, rather than wealth accumulation.
“The learning of my career is that you make all your money by taking three to four positions a year that work really well, and most of our risk is in fixed income, a little bit of currency, very little equity,” he said. “And my job is to work out what rate cycles will look like and hold them for the whole cycle.”
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