Prices Gone Haywire Attract Billions to Dislocated-Debt Funds
- Credit managers rush to pick up debt shaken loose by turmoil
- ‘It’s like 2009 all over again,’ as value comes unmoored
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Credit markets are a chaotic mess, riven by deeply distressed prices, sudden downgrades and warnings of bankruptcy. To some money managers, it’s a perfect, once-in-a-lifetime opportunity.
Highbridge Capital Management, Sculptor Capital Management and Knighthead Capital Management are among investment funds raising mountains of fresh cash to buy mispriced loans, bonds and other forms of credit that were dumped in the March rout. They’re amassing it in batches of $200 million to $2.5 billion to go after dislocated debt, and most are aiming to put the money straight to work.
“It’s like 2009 all over again -- some of the documents are even the same,” said Timothy Clark of law firm Dechert LLP, hearkening back to the last financial crisis when credit investors made handsome profits in a matter of months. “Those who raise funds earlier, even if they weren’t the most talented, got the biggest returns,” said Clark, who represents clients in fundraising and fund formation.