London-based hedge fund Arini Capital Management has suffered significant losses this year after large bets on distressed European debt soured, according to sources familiar with the matter. The fund’s flagship strategy has declined by more than 8 percent since January, marking a downturn following several years of strong performance.

Founded in 2021 by former Credit Suisse high-yield trader Hamza Lemssougguer, Arini quickly gained a reputation for taking substantial, leveraged positions in the debt of struggling companies. The fund delivered returns of 27 percent in 2023, 21 percent in 2024, and 10 percent in 2025. However, this year has seen its master fund—the largest of Arini’s strategies—incur losses driven by deteriorating positions in key holdings such as Aston Martin and Altice International.

Arini’s largest individual setback came in May with its exposure to Altice International, part of billionaire Patrick Drahi’s telecom conglomerate. Late last year, Altice’s bonds dropped sharply after Drahi removed some of the group’s most valuable assets from collateral pools backing creditor loans. Arini joined other senior bondholders to challenge the company’s move, arguing it triggered a default. A subset of these creditors, including Arini and Silver Point Capital, later sought a restructuring deal that would grant them priority payouts for agreeing to litigate, a development that further depressed bond prices and contributed to Arini’s losses in July.

The fund also faced setbacks in July when Aston Martin shifted key naming and branding rights out of reach from creditors holding more than £1.5 billion in debt. These assets were pledged to private credit firm HPS as part of a contentious £550 million financing deal that subordinated existing bondholders, including Arini, a major holder of Aston Martin debt.

Amid these challenges, Arini has experienced personnel changes with departures of senior traders, including U.S. chief executive Gavin Yates, who is reportedly moving to Citadel, and investment team member Ben Elliott.

Despite a tough performance period, Arini sought to reassure investors in a recent letter, emphasizing that its long-term outlook and risk assumptions had not changed and noting that it had increased exposure to its highest-conviction positions. The fund pointed to prior periods of volatility followed by recoveries—for example, losses of around 8 percent over two months in early 2024, which were followed by gains of approximately 29 percent over the subsequent year. Since its inception, Arini reported an overall return of 73 percent across its first four years.

Alongside its flagship fund, Arini also runs other strategies that have fared better this year. Its credit opportunities fund has gained around 12 percent year to date, while a direct lending strategy returned approximately 7 percent, according to insiders. The firm also manages an asset-backed finance strategy.

Arini’s investment style is characterized by concentrated positions in some of the riskiest segments of the European credit market, often becoming the largest bondholder in distressed companies. This approach can result in significant mark-to-market volatility, as large holdings in illiquid debt are difficult to unwind when prices decline. The fund is also active in the credit default swaps (CDS) market, trading protection against defaults in leveraged companies.

Earlier trading in CDS tied to Ardagh, a glass and packaging company, resulted in sizable payouts after a restructuring last year, highlighting the complex risks involved in Arini’s derivative strategies. The fund also reported losses in July from telecom-related holdings, including an equity stake in EchoStar and bond positions in Brightspeed, a company facing financial uncertainty under Apollo ownership.

Additionally, Arini holds debt in Pfleiderer, a wood-panelling firm backed by Strategic Value Partners, which has seen its bonds plunge sharply this month. Creditors, including Arini, are expected to take control of Pfleiderer through restructuring efforts, following similar acquisitions of distressed companies such as Ardagh, Lowell, and potentially Italian packaging firm Reno de Medici.

The fund’s involvement extends to selling portions of derivative indices, specifically “equity” tranches that absorb losses in the riskiest tier of European junk debt. Through these positions, Arini effectively provides insurance against default rates exceeding current market expectations, underscoring its complex role within the high-yield credit landscape.