Greece is once again a bet reserved for the bravest of investors.
After two years of relative calm, the election of the anti-austerity Syriza party in late January caused renewed volatility in local stock and bond markets. New Greek leaders are negotiating with European officials to restructure their bailout package—as the European Central Bank on Wednesday reportedly provided an emergency $78 billion loan to Greek banks. There's even the possibility of Greece leaving the European Union, a so-called Grexit that could have ripple effects across the Continent.
Amid the turmoil, hedge fund managers are again eyeing Greece for bargain shopping, but the political uncertainty has kept them from aggressively investing there.
The small group of hedge funds betting on a Greek recovery includes Third Point, York Capital Management, Alden Global Capital, Greylock Capital Management and Eaglevale Partners, according to people familiar with the situation.
"At this moment, we don't know if the crisis is going to be resolved," Diego Ferro, co-chief investment officer of nearly $1 billion global investor Greylock, told CNBC.com this week. "But if you think the crisis is going to be resolved and Greece stays in the EU, either Greece is very cheap or countries of the periphery are very expensive."
Greylock has bets on Greek government bonds—it helped negotiate their restructuring in 2012—and bank stocks like Athens-based Alpha Bank, according to Ferro.
York sees the new volatility as an entry point, according to a person familiar with its investing strategy. James Dinan's $25 billion firm reduced Greek exposure late last year but has been adding back to holdings given recent volatility and what it views as unduly low valuations. York holds both government bonds and banks in a bet they will gain in value, according to the person.
Other prominent investors are waiting to see what happens.
"We are prepared to invest more in Greece. But we need political certainty," Paulson & Co. founder John Paulson said at a Greek investment conference in December. "As soon as stability is achieved, we will step up our investments."
Paulson, which manages $17.8 billion overall, still holds longstanding equity positions in two major Greek banks, Piraeus Bank and Alpha, according to recent investor materials.
Other private funds with small bets on Greek stocks include Emerging Sovereign Group and Dalton Investments ($29 million and $20 million in shares of National Bank of Greece, respectively) and Pine River Capital Management and Wellington Management Co. ($34 million and $49 million in Tsakos Energy Navigation, respectively), according to regulatory filings as of Dec. 31 compiled by data tracker Novus. Those Greek stock holdings are public because they are bought through American depositary receipts, or ADRs, which trade in the U.S. but represent shares in a foreign company.
The Greek stock index is down more than 40 percent over the last six months.
Other hedge fund plays mentioned by investors include shorting European banks that have high exposure to Greece, and betting against the euro, which could decline in value if the European economy falters in part because of Greece.
To be sure, Greece isn't a major play for hedge funds overall. "While a few are playing in debt and stocks, Greece isn't a big hedge fund trade yet because the politics are so uncertain," said Arthur Salzer, chief investment officer of Northland Wealth Management, an Ontario-based firm that runs about $400 million in total investments, including hedge funds, for clients.
"Only a few managers have initiated positions, and sizing is pretty small," added Eric Siegel, head of hedge fund research and management at Citi Private Bank. "They're still assessing the situation given all the uncertainty and waiting to fully build out positions."
Novus data on Greek ADR stock investments show that hedge fund investments declined from $396 million on June 30 to $270 million on Dec. 31, paltry sums for the hedge fund industry. Only a small, single-digit percentage of Greek debt is held by private investors, according to Deutsche Bank estimates.
That said, Dan Loeb's Third Point remains invested in Greece through its dedicated Hellenic Recovery Fund despite concern over new leftist Prime Minister Alexis Tsipras.
"We believe that unless an agreement with creditors is reached this month, Greece will begin experiencing extreme liquidity pressures in early March," Loeb wrote in a recent investor letter.
Loeb noted that Germany, the most powerful actor in Europe, would likely work to keep Greece in the EU, thereby adding certainty to the situation.
Some earlier fans of Greece seem to be steering clear of the troubled country for now.
Paul Singer's Elliott Management appears to be out of the Greek trade, despite reportedly investing in the country several years ago, according to a person familiar with the situation.
"Greece [in addition to almost all of Europe] needs to be growing faster than it is currently growing. Unemployment and underemployment are horrendous, and the depression there is in its seventh year and counting," Singer wrote in a recent letter to clients, noting his pessimism on Greece and others in Europe making necessary structural reforms.
It could not be determined if previously reported Greek hedge fund investors Aurelius Capital Management, Och-Ziff Capital Management and Baupost Group were involved today. There were no obvious indications, such as public filings or statements.
Bullish bets on Greece have been painful of late.
Eaglevale Partners—the $400 million hedge fund firm co-managed by Chelsea Clinton's husband Marc Mezvinsky—saw its $15 million Greek-focused fund fall 48 percent in 2014, according to The Wall Street Journal. Prominent hedge fund manager Marc Lasry was a personal investor in that fund.
Eaglevale's main fund also dropped slightly last year, in part because of incorrect bets of a Greek recovery, according to the report. The firm is still bullish on Greek stocks, according to person familiar with the situation.
Losses haven't deterred all investors.
Alden Global Capital, the $1.7 billion hedge fund firm based in New York, launched a dedicated Greek fund in early January to bet on local stocks and government debt. The fund has attracted $60 million from investors already and, combined with internal capital, runs $100 million, according to a person familiar with the situation.
The Alden Global Hellenic Opportunities Fund, managed by John Wollen, is seeking as much as $250 million to manage and expects addition investor allocations shortly, according to the person.
Alden's main fund fell 9.6 percent in January thanks in part to losing Greek positions, according to the person.
Spokesmen for Alden, Aurelius, Elliott, Third Point, Paulson, Baupost, Eaglevale, Och-Ziff and York declined to comment.
Greylock's Ferro said the potential fallout from a Grexit is overblown, even if he thinks it's best for the country to say in the EU.
"If Greece were to leave the euro zone, it will get cheaper. But do I think it's going to be the end of the world? No," Ferro explained. "Countries don't disappear."