"Hybrid" funds, with HF-style distressed investment strategies in PE-style closed-ended fundsSubscribe
Does anyone know of managers doing distressed funds with an HF-style strategy (using PBs - for shorting, margin etc. - and ISDAs), but putting it in the kind of close-ended, drawdown fund usually used by PE managers, with capital locked up for X years? I think maybe Davidson Kempner's Long-Term Distressed funds did this (their older ones had PBs, for sure), and maybe others? I'm wondering how common this is, so I'd be very grateful for any info.
My thinking is:
- That kind of strategy needs cash on hand to support it.
- Closed-ended LP structures can't get new cash - they raise money at the start, draw it down when they need it, but that's that.
- So the fund needs to just hold cash, like a normal hedge fund, and so there's going to be an impact on IRR. This is why PE funds and other closed-ended funds don't hold much cash. (But maybe that isn't a problem, just as it wouldn't be in a hedge fund?)
- Because of cash/IRR issues, and because short selling is usually a short-term bet, most of the closed-ended funds are long-only and don't use PBs - I think? Or have I got this wrong?