The first half of the year was no time for U.S. distressed debt hedge fund managers to be timid. Unfortunately for their investors, they were. The Bank of America Merrill Lynch U.S. Cash Pay Distressed High Yield Index
advanced more than 25 percent for the first half, largely buoyed by the recovery in energy bonds as crude rebounded from February lows. But distressed hedge funds returned a mere 3.2 percent in the same period, according to data provider Hedge Fund Research, after shunning investments in oil, gas and commodities producers.

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