Smart-Stock.net

A recent Reuters report states that an increasing number of hedge funds are investing part of their portfolios in distressed assets.  A survey of 100 hedge fund managers by the Schwartz Cooper law firm found that more than 60 funds have invested in distressed companies, and almost 40 funds plan to buy assets from such companies within the year.

Richard Bendix, director of the survey, explains it this way: “Hedge funds are under increasing pressure from their investors to perform, but the risks associated with that performance have increased dramatically.”

For investors and fund groups planning to invest in distressed assets, it is paramount that they fully understand insolvency situations, namely, their legal obligations should they be unable to sell their stakes in distressed companies.

These responsibilities aren’t dissuading an increasing number of investment firms.  The fund managers surveyed are especially interested in the housing, automotive, construction, and energy sectors as upcoming distressed asset opportunities.

Whatever their inherent risks, it’s becoming clear that distressed assets are a growth opportunity too lucrative for aggressive investors to pass up.