Hedge Funds Distressed Debt Survey
Hedge Fund Managers Optimistic on Distressed Debtenergy, banking and health care. A majority of those questioned said that they have at least some of their portfolio invested in distressed debt and that they plan to hold onto those investments.
Of the 120 hedge fund managers who answered the questionnaire by email in December and January, 65 percent said at least some of their portfolios were invested in financially troubled companies, up from 53 percent in a year-earlier poll.
More than one in every three managers said they had put at least 20 percent of their portfolios into distressed debt, up from one in 10 a year earlier.
A majority of those questioned said the risk profiles of distressed companies will be flat or on the decline this year, meaning hedge funds are likely to increase their profits by staying out of bankruptcy court.
"The perception is that there is less risk of bankruptcy, or greater investment returns from those type of investments," said Rick Bendix, co-head of the bankruptcy and restructuring practice at Dykema.
While a majority of those questioned said they plan to hold onto their debt investments, 39 percent said they are likely to sell debt in 2010, up from 23 percent a year earlier. Source
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