Does anyone know the performance of credit/special-situation shops this year? Did COVID and recovery help or ruin them? Many seemed to struggle already prior to the COVID (Solus, BlueMountain, King Street losing many senior folks).
| +53 | Do Hedge Funds Value Paper Trading Performance Potential Hires? | 23 | 2h | |
| +43 | Interested to hear from average pod PMs | 12 | 22h | |
| +39 | Why did Citadel hit the dumps in 2008? | 11 | 2d | |
| +33 | Junior analyst - what to look for? | 11 | 5d | |
| +32 | Advice on Trading Futures for PA | 7 | 1d | |
| +24 | Taula | 11 | 16h | |
| +24 | MM Comp for 2+2 Candidate? | 24 | 17m | |
| +22 | Pershing Square Valuation | 7 | 2d | |
| +18 | How do I land HF from ER? | 9 | 2d | |
| +12 | Good Substacks? | 5 | 2d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
The CS, Eureka and HSBC Private Bank reported reruns show that distressed and credit opportunity funds have returned flat to slightly negative YTD and for the 1,3,5,10-yr averages are between 3.5-4%. Now that 2009 is out of their 10-yr returns, which was the last banner year for distressed. Hedge Funds are great wealth creating vehicles for their owners, not so much for their investors.
As someone who's been in distressed for a while, what are your thoughts on someone just now entering the asset class for a career? I find distressed to be very interesting and enjoy following a lot of the topical situations (Eaton Vance and Apollo, travelport and neiman IP stripping, etc), but I believe that things are different than when Moyer wrote his book. For one, there is so much money chasing so few opportunities and even the concept of forced mutual fund sellers that can be taken advantage of doesn't apply all the time anymore (i.e Serta Simmons situation with eaton vance). When you add in Fed intervention distorting price signals, there's been no attractive distressed opportunity set for a decade now. There are just so few funds that are actually performing well, outside of a few that I have heard that are sub $3bn in aum, that I'm unsure if it's the smart career choice post my RX stint even if I do find it more interesting that vanilla L/S or PE.
Hildene -17%
Marathon securitized credit -20%, loan opportunities -13%, special opportunities -3%
Owl Creek credit opportunity -0.1%
Angelo Gordon super -6%, Mortgage Value -8%, corporate credit opportunities +1%
CVC -7%
Sound Point -3%
First time hearing of CCC vs. BB dispersion or holding shitbag credits in energy and retail going BK? HY Index includes all the shit compressing from 4.5 to 3.125% yield that a lot of these firms don't touch in their total return opportunity products (for better or for worse). HY Index has outperformed almost all fund over YTD, 1, 3, 5, 10-yr unfortunately
Yeah I totally get that. Its just surprising how religiously some funds adhere to their mandates to the point where they just basically decide not to take free money (IG Bonds and TLs in the 80s in march) because its not "what they do". Maybe it stems from the fact that they don't have analyst coverage of these performing names that traded down 20 points and couldn't get enough comfort with the risk in time. I do know however that several traditional distressed funds played the IG trade and did well (Silverpoint, Oaktree, Goldentree, Baupost).
The only thing is being invested in illiquid credits at the top of the cycle was a choice in and of itself. If you were concerned about how tight the market was going into this year and wanted to position yourself to take advantage of any dislocation/correction, you stayed relatively liquid or held cash. Either that or your platform is solid enough to raise additional capital from long-standing LPs at a moment's notice or have an internal balance sheet. Not every credit investor is out there holding CCC "differentiated view" dogshit (hint: it's not differentiated) that they got stuck on. The market call of the year was clearly to trade up in quality, using the dislocation window where prices converged indiscriminately between IG, BB/B, CCC - if you could buy a representative risk in each bucket at similar prices, you obviously buy the IG and BB. You are incorrect to suggest that this was some yield curve bet - it's not with the exception of long duration IG - it was a spread bet and profound shift in the market on how risk was being (incorrectly) priced. That was the big picture. Spread compression bet is just a different name for a valuation and discount rate bet - the bet you are making stems from the same logic between wanting multiples to expand on illiquid reorg equity and wanting your Charter bond to compress from +700 bps to +200 bps. So, it is really not excusable that a manager would dismiss missing this opp set by saying that is not their mandate - this kind of risk/reward rebalancing is exactly what they are supposed to see and profit from.