What makes a good Credit Short
Ignore title. Going to a LO cross-cap-stack (HY, Distressed) fund this summer, did L/S (net short) equities previously and got curious after a networking chat - lots of material covers what makes a good (equity) short, but what makes a good credit short?
- Different recovery estimates under default?
- Do you short with the expectation of filing as the catalyst?
- Or Credit rating downgrades?
- Do fundamentals even factor other than the ramp up to insolvency?
Anecdotally the only major price action (>10c) I've seen in credit is when filing / risk of LME comes to be discussed, but I've yet to sit at a desk staring at pricing all day.
TLDR: is shorting credit based on a hard rating/process catalyst or earnings deltas? I'd wager the former but curious on thoughts.
Timing
how's that any different than equities?
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