Eaglevale Partners LP, which is run by Hillary Clinton’s son-in-law, Marc Mezvinsky, bet big on a turnaround in the Greece economy — and lost.
“Eaglevale Partners LP, founded by Marc Mezvinsky and two former colleagues from Goldman Sachs Group Inc., told investors in a letter sent last week they had been ‘incorrect’ on Greece, helping produce losses for the firm’s main fund during two of the past three years. The main fund dropped 3.6% last year, far trailing the 5.7% rise for similar hedge funds tracked by HFR Inc. … A smaller Eaglevale fund focused only on Greece plunged 48% last year, said the person familiar with the situation, hurt by the belief Greece’s economy will see a quick rebound.”
But perhaps most revealing is this fact: The CEO of Goldman Sachs is a key investor in the fund:
Among investors in Eaglevale’s main fund is Goldman Sachs Chairman and Chief Executive Lloyd Blankfein , people familiar with the matter said.
Blankfein appears key to the enterprise because, well, Goldman Sachs has helped raise capital for the fund:. From the start, Eaglevale’s moves have been closely followed, investors said, partly because of Mr. Mezvinsky’s family connection. Ahead of the firm’s launch, Goldman Sachs hosted group sessions for prospective investors that drew standing-room-only crowds. The investment bank is one of the firm’s prime brokers, which help hedge funds execute trades and introduce them to potential backers.
The founders’ pedigree helped raise them money, investors said. One of Mr. Mezvinsky’s partners, Bennett Grau, got his start at J. Aron & Co., the commodity-trading arm that produced many of Goldman Sachs’s current leaders, including Mr. Blankfein.
The EU has not forgotten Goldman’s role in Greece’s misrepresentations to the EU in 2002. Greece’s debt managers agreed to a huge deal with the savvy bankers of Goldman Sachs at the start of 2002. The deal involved so-called cross-currency swaps in which government debt issued in dollars and yen was swapped for euro debt for a certain period — to be exchanged back into the original currencies at a later date.
Such transactions are part of normal government refinancing. Europe’s governments obtain funds from investors around the world by issuing bonds in yen, dollar or Swiss francs. But they need euros to pay their daily bills. Years later the bonds are repaid in the original foreign denominations.
But in the Greek case the US bankers devised a special kind of swap with fictional exchange rates. That enabled Greece to receive a far higher sum than the actual euro market value of 10 billion dollars or yen. In that way Goldman Sachs secretly arranged additional credit of up to $1 billion for the Greeks.
This credit disguised as a swap didn’t show up in the Greek debt statistics. Eurostat’s reporting rules don’t comprehensively record transactions involving financial derivatives. “The Maastricht rules can be circumvented quite legally through swaps,” says a German derivatives dealer.
Of course being related to a former president and perhaps future president has apparently been helpful to Mezvinsky’s enterprise as well.
