Distressed Debt Funds Strategy Profile

With global credit markets posting double digit drops last year, distressed debt hedge funds managed to stay positive with short positions, bespoke financing deals and some upward repricing of individual distressed bonds helping to counter higher inflation and growing recession fears. Average 2022 returns for our index of distressed debt hedge funds were 0.8%, putting it second behind CTAs and ahead of our general hedge fund credit index, while over three years the sector is well ahead of both credit hedge funds and the overall hedge fund universe.

Cumulative returns over past decade

Investor sentiment towards distressed debt funds has also turned much more positive, with net investor flows – the first time since 2014. LPs appear to be betting on the sector’s ability to take advantage of a range of distressed opportunities as defaults and restructurings become more common across regions this year

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