Public Credit HFs
Can someone familiar with the space please provide a list of hedge funds that participate in the stress/distressed public credit space? Specifically, I think it would be helpful to exclude very large MFs that participate in numerous asset classes (Oaktree, Apollo, etc), funds that also have CLO strategies (King Street, Anchorage, etc), and funds that are somewhat sub scale (call it sub 3bn AUM).
In other words, what are some examples of scaled funds that are exclusively focused on distressed credit?
In no particular order and a bit overinclusive potentially:
Diameter, Arini, Redwood, Mudrick, Rokos, Glendon, Nut Tree, Silver Point, Elliott, Monarch, Third Point, GoldenTree, Farallon, Arbour Lane, Stonehill, Caspian, Pentwater, Readystate, Varde, Knighthead, Davidson Kempner, Brigade, Beach Point, Carronade
Any color on readystate?
Great list.
What is the updated outlook on Beach Point?
Anyone have insights into the following I'm less familiar with?
Arbour Lane -- focused primarily on being large in sub-$1bn debt situations / pretty active on post-reorg side; that said, have heard tell of them playing in a few bigger structures too. Seem sharp generally
Stone Hill -- seen them in a couple of deals but not very up close so don't know that much
Third Point -- know Loeb started as a credit guy and they have a group of some kind also don't know much
Not trying to turn this into a rankings thread but would be helpful to get some general buckets for these firms considering factors like fund performance, learning experience, mentorship (are PMs invested in developing the junior analysts) and upward mobility
Any view on canyon? Think they have a CLO platform but the hedge fund side is separate
How’s Beach Point? Any info on their public credit team?
I feel like DK, Elliot, and Farallon are in a class of their own. Maybe add in Diameter and Silver Pointer
mudrick
If you wanted to really lean into the “no CLO / exclusively focused on distressed debt”, the above list (which I think is quite good) can actually be whittled down even further:
- Redwood
- Mudrick
- Glendon
- Nut Tree
- Elliott (I know they are not exclusively focused on DD but given how active they are in the market it feels wrong not to include them)
- Monarch
- Arbour Lane
- Stonehill
- Caspian
- Pentwater
- Readystate
- Varde
- Knighthead
- Davidson Kempner (same disclaimer as Elliott)
- Carronade
You could probably double the list if you expanded the AUM criteria to >1bn.
What would be the 2-3 top funds from the list in terms of risk adjusted returns? Not really talking about absolute returns bc I’m aware risk appetite between funds (even tho gravitating around stressed/distressed) can vary
If including Carronade, probably supposed to include 140 Summer, Castleknight, Hein Park, Rubric as well. Other missing funds with large distressed pockets but don't do CLOs include Farallon, Baupost, MFN, Finepoint, Bracebridge, Abrams, Senator though alot of these are cross cap stack (ie; do a ton of equities or majority equities too).
Also certain pods / multi-managers run alot of AUM where they should start being part of the conversation.
One of the funds in your first sentence is a joke.. process is a complete joke akin to shooting fish in a pond. Good on them for being successful but no wonder there has been high turnover recently
Assume this is a 140 Summer comment?
just say which one?
the distressed funds that I've seen performance numbers for...justify why allocators ignore the asset class today
Just say castleknight bro
Can you clarify? You mean the hiring or investment process is a joke?
What is the current outlook on Bracebridge/Abrams in the distressed space? How are the firms?
Won’t speak on returns because everyone has their own opinions there. But I’m familiar with bracebridge as a firm and I have a lot of respect for some of the senior people there. They’re smart, very professional and at the same time extremely nice as well… the latter is very rare in this industry. I’ve heard some say there’s internal politics to deal with at the firm which has lead to turnover but don’t all places have that issue? The junior I met spoke very highly of his time there.
Abrams is a really cool seat because they will play distressed opportunistically and in size mixed with mostly equities (GOOGL, META, CPNG, etc.) and privates. Mostly looking from afar because almost impossible to get a job there given how lean they run. 5 or 6 analysts x 12bn . . .
why does everyone want to get into distressed credit. it sucks
Care to explain?
lower fees relative to buyout PE. PMs do well of course but naturally investment professionals will have lower comp on average relatively speaking. Fewer in-court RX opportunities nowadays. Sometimes bad business are just bad. Have to do more annoying work to generate a lower return. Credit makes you contrarian by nature. Better to be an optimist. Exciting to identify industry winners that offer value and have a right to capture market share. Better than investing in a flat top-line revenue company with overleveraged cap structure bc someone idiot bought at too high of a multiple that the company failed to grow into.
I find it way more interesting than vanilla credit and the like
how does marathon asset management stack up?
Anyone care to do a ranking / explain the differences. Feel like the credit world is pretty opaque
I would argue that public credit HFs don't have a real "ranking" analogous to PE because smaller opportunity set means most public credit HF teams will look at similar names, as opposed to clear size stratifications you see in PE (i.e. megafund vs. middle market). The multi strat funds listed above are more likely to be steerco in larger or more complicated situations, but in general most teams at pretty much all shops listed above are comparably sharp with similar coverage. Certain funds may be considered 'hotter' than others in a given year (Diameter at current moment as an example) but all good seats to be in.
As a senior incoming at one of the top credit hedge funds mentioned here outside of New York, which are the funds that are most open to first year analysts out of undergrad (HWSM) and what’s the process like?
del
Bumping this again
If you want to narrow down even further: Arini, Diameter, Knighthead, Elliott, Carronade, Redwood, Appaloosa, and Hudson Bay. DK is kind of dead nowadays
Silver Point?
For what?
Why is DK dead?
They don’t really do stressed/distressed anymore and certainly not in the way they used to. Kinda like a LO HY asset manager holding index positions. Just talk to them and you’ll realize.
Arini in the US is mostly a CLO shop and is small. They Spend most of their time doing that. If you wanna do distressed, it’s a great firm with good returns. But the idea of doing par lending like that for CLOs might not be interesting. Same can be said about a lot of the shops that make you cover both.
Am guessing that is why OP specified against firms that also have CLO strats
Not true at all…Gavin sits in NY. They manage their massive Brightspeed position (they and Baupost just put in $450 each into the 10.5% 4a2 tap).
and everyone actually in the business would know the younger guy on the team there hes very sharp and well connected…amount of misinformation here is insane.
They also have a CLO business but it’s far more Europe centric (hit HDS on Merlin in BB as example; now do that for UKG or any of the other very highly liquid lsta 100 $ loans and see if you can find them).
Just not true at all
That said agree w others on your list. Though I have to imagine Redwood struggling given MODV and HOME double whammy this year; but who knows maybe small positions.
All absolved and then some if you hit HDS on SATS though.
Any updated thoughts or remarks on Appaloosa?
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