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Distressed Debt Traders Have Tons of Cash and Nothing to Buy

  • Money managers’ dry powder could buy almost the whole market
  • Only $8.5B has been raised for distressed debt funds in 2019
50 subject one dollar note sheets sit in a stack before receiving a serial number and the U.S. Treasury and U.S. Federal Reserve seals at the U.S. Bureau of Engraving and Printing in Washington, D.C., U.S., on Tuesday, April 14, 2015. Republican efforts to pass a fiscal year 2016 budget cleared another hurdle as the House named its members to a conference committee and Senate Majority Leader Mitch McConnell pledged to do the same by the end of the week.
Photographer: Andrew Harrer

The hardest part of being a distressed debt investor now may be finding something to do.

Funds that bet on troubled companies -- those struggling to pay their debt or already in bankruptcy -- have spent years preparing for a creditpocalypse, and have got about $80 billion of cash left to invest, according to Preqin and Bloomberg Intelligence. That’s almost enough to buy the entire distressed U.S. market at face value now. But they have few places to put it to work: While cracks are starting to appear in the U.S. economy, interest rates are low, leaving most corporations in decent shape.