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These Money Managers Are Getting Ready to Profit From a U.S. Economic Downturn

  • HPS, Z Capital sold deals that can hold more CCC rated loans
  • Such CLOs offer higher debt returns to compensate for the risk
San Bernardino, CA Files For Bankruptcy Protection

Photographer: David McNew/Getty Images

Some of Wall Street’s biggest buyers of leveraged loans are gearing up to profit from a U.S. economic downturn.

A growing number of money managers that buy the loans and bundle them into bonds are giving themselves more leeway to purchase debt made to the weakest companies. Firms like Ellington Management Group, HPS Investment Partners and Z Capital Credit Partners expect the ranks of corporations with the lowest junk ratings to grow, and believe many investors will be forced to sell loans when companies get downgraded.