Sharpen your talons and prepare to feast on the weak and the dying. You'll need to think like a vulture as we enter the unforgiving world of distressed debt investing. In this world, investors specifically seek out companies that are performing poorly or are on the brink of bankruptcy. There are always companies in the market that look terrible but are likely to get back on the right track. The first instinct for the regular investor to invest in a financially distressed company's shares, but, as we'll learn in this article, the debt bonds of these firms is often a much more attractive investment.
Vulture funds await Jersey decision on poor countries' debts
"The Argentine Dilemma: “Vulture Funds” and the Risks Posed to Developi" by Mine Doyran
But what does this mean for you? Have you received a letter about your mortgage being sold? Are you worried that recent loan sale announcements will affect you? If you have long-term mortgage arrears, there is a growing likelihood your mortgage account has been sold to a Non-Bank Entity.
Five "Vulture Fund" FAQs
The recent legal victory of a small group of vulture funds over Argentina in the battle over its sovereign debt has renewed the discussion regarding the role of these funds. Indeed, the decision of a US Court of forcing Argentina to pay its creditors based on an interpretation of an obscure clause has sparked fears regarding the vulnerability of other countries to the aggressive legal strategies employed by vulture funds. The main preoccupation is that even though they represent a relatively small group of firms, mostly based in tax heavens and financial centers like NY and London, their capacity to inflict economic damage on countries struggling with debt can be quite significant.
A vulture fund is a hedge fund, private equity fund, that invests in debt considered to be very weak or in default, known as distressed securities. It is a fund that invests in companies or properties which are performing poorly and may, therefore, be undervalued. It invests in assets whose prices have been severely depressed in the market.