You blinked and you missed it! The best for distressed has apparently come and gone

Oct 20th, 2009 | Filed under: Academic Research, Hedge Fund Industry Trends, Today's Post | By:
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dontblinkFor several years leading up to the big Credit Crunch of ’08, experts and pundits alike were pointing to hedge funds focused on the distressed market as the next group in line to clean up.

Yet time and again it never seemed to really happen; through the subprime crisis in the summer of ’07 and through the first round of the credit crunch, expectations were that buying up virtually every kind of distressed security would be an easy, no-brainer windfall.

Boy was that an understatement.

Of course, 2008 wasn’t great for distressed guys either, but as the rest of the world focused on trying to keep ahead of the game in ‘09, distressed-focused shops were out there grabbing loot.

Stuart Kovensky, co-COO of New Jersey-based Onex Credit Partners, a distressed debt shop, told attendees at an AIMA luncheon last Thursday that the opportunities this year have been “fantastic”.

“In 2009 we bought debt at fantastic prices – because people had to sell,” noted Kovensky, who along with financial newsletter notables Dennis Gartman and Scivest Capital’s John Schmitz participated in a panel discussion on what’s next for the economy, financial markets, and, of course, hedge funds.

In terms of the amount of distressed debt available at bargain-bin prices, “the sponge – the cash out there – wasn’t big enough to absorb it,” Kovensky said.

The reasons are fairly obvious: starting with the U.S. housing market collapse, which in of itself has generated distressed opportunities, and expanding into other areas as the U.S. and global economies recoiled. More…

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