The Best Distressed HFs in 2024
Currently an RX analyst interested in the distressed HF space. With how much the landscape has changed in the past years (many once notable names blowing up) would be very interested to hear updated thoughts as to which distressed HF still represent the best seats. How would you compare DK, Elliott, Golden Tree, Silver Point, Redwood, Diameter etc… in terms of best opportunity for someone 2-3 out of school?
none
Bump
Whichever one lets you work across multiple strategies in addition to distressed, to make it easier to pivot away from distressed asap
Appreciate the reply. Which funds would those be?
You just want to be in a seat that is able to take large enough positions to be in SteerCo. Otherwise you’re just hoping you don’t get fucked
Also RX analyst here - also interested. Just some observation/views of my own below. Feel free to add or correct me if I'm wrong. A lot of distressed credit shops are very small in turns of headcount, so hard to come by opportunity as they don't recruit/churn people every year
Other funds that i know but don't know enough to comment on
aint no way there's a hf called "nut tree"
DK performance = good? They're an asset gatherer benefitting from LP laziness.
https://www.scers.gov/sites/main/files/file-attachments/20240320_-_item… - pg 3
Any view on H/2 Capital Partners?
This is basically all incorrect and highly misleading.
What about Rokos? Anyone heard about special sits at Rokos?
You are correct that Diameter is taking a step back from distressed. Believe Canyon has lost its cred and is now close to being garbage; the senior people are good relationship managers so LPs have stuck around but not a good fund. Mudrick is excellent reputationally but not sure about returns / culture. Elliott has gotten so big / hierarchical that friends inside the firm say it is the same iterative bs that goes on in large banks and MFs...not the same risk-on culture that used to exist.
distress = a tool, not an all-weather strategy, even among so-called distressed debt specialists. there's a reason most of funds you mention now have diversified lines of business (e.g., pvt credit, clo, re, pe, structured products), or likely in the boneyard of funds that fancied themselves masters of the universe / capable of earning alpha with swagger alone. great skill but wildly overrated as a specialty imo. you have very smart / sharp-elbowed competitors fighting for pieces of low quality companies in most instances. and distribution of outcomes has a significant lefthand skew. how many hitters are there today in that universe? not a ton... market's also fairly efficient with pricing, and advisors are the ones extracting excess returns. think of this like you would any other biz -->> is that really a good setup for consistently posting alpha?
from your list, sp and mudrick both sharp. gt is a tough place to work but good seat if you can swing it. hgvora, castleknight, redwood, nut tree, knighthead all do pretty interesting stuff. diameter not so much in distress. they're large / very active though so would be a great learning environment at junior/midlevels if youre set on credit. don't forget pods if you want to learn risk management, which is so important
great info. one question: how does your traditional distressed HF (DK/SP) differ from distressed pods in MM? You mentioned risk management - how does that impact analyst's decision making?
Didn’t realize pods ran distressed strategies
it doesnt directly impact you as younger analyst if you do distress at citadel vs dk. it's more like your pm will be a true risk manager, so you will likely work on different types of situations and *hopefully* avoid the junkier stuff that's more prone to blowing up
King Street?
Same tier as Davidson Kempner. Middling returns, survives on dumb LPs.
anyone have insights on knighthead
Heard good pay but can be tough. Not sure how bad HTZ will be for them though.
And Rokos?
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VR Capital is top of the league when it comes to the unashamed level of greed.
Do tell! Interviewed with them a few yrs ago but didn’t make the cut.
Not sure if all this Russia-Ukraine thing made things better or worse for them.
ASOF
Wouldn’t really call them a distressed HF - more like an offshoot of their direct lending strategy that focuses on hairier situations that can provide more flexible forms of financing in size (mezz, holdco PIKs, prefs etc.). I think they’ve dipped their toes into some public situations during market dislocations (their first fund coincided with Covid I believe) but they’ve not really been out there in any of the big restructuring / liability management situations, i.e. bread and butter isn’t trading in the secondary market
Do you feel it would be straightforward to move from ASOF to a distressed hedge fund?
Saying they are just an offshoot of direct lending is probably a bit too punitive tbh, though will see how they evolve as they are now part of the credit team at Ares beginning this year.
Group was enormous in Air Methods, GMR, Team Health, Frontier, Swissport, and is big in some of the larger distressed TMT and healthcare structures. View them closer to an Angelo Gordon Credit Solutions or an Oaktree Opportunities than just a direct lending offshoot and they used to be housed in PE until this year. Long-only out of drawdown funds, mandate can do distressed for control, liquid distressed, hairier direct lending, financing platforms, etc. Agree they have been very active recently though in these junior capital deals (McLaren, CPP, Virgin Cruises, etc.).
Fwiw they historically have been driver of the pre-COVID LME deals (think they actually did the MyTheresa spin when in PE / did the original Revlon dropdown).
Any Thoughts on Monarch and Blue Torch? Not HFs but do play in the space.
Blue Torch is pretty much pure play 1Ls and Unitranche, with emphasis on structuring, securing good underlying collateral value and underwriting a complex credit that may not be able to get attention from shops with lower CoC or less comprehensive diligence process.
Culture is straightforward and serious without being mean; no fluff either way from what I understand. Show up at 9, 5 days in office, if your work is done by 6/7 you can leave without facetime judgments, but you will likely be working later than that. Do your work well and on time; no obligation for company socials or whatever. PM if you want a little more info
Thoughts on marblegate?
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