In 2008 and 2009, distressed debt was the most in-demand private equity strategy for institutional investors. And it doesn't seem to have cooled off this year, despite a recovering economy and general sluggishness within the private equity fundraising market.
Oaktree Capital Management, Centerbridge Partners, Lone Star and MHR Fund Management are just a few large distressed debt firms currently raising new funds.
There are a number of reasons these players are likely to find success. For starters, they are riding the coattails of last year’s blockbuster year for distressed debt (i.e., strong strack records). Admittedly, debt is trading around par this year -- and much of the upside for distressed debt plays is behind us -- but timing concerns rarely dampen LP enthusiasm.
“Aside from the limits of the market opportunity, most investors are still looking to deploy capital in that space,” said Jérémie Le Febvre, a partner with fund placement agent Triago. One reason, he explained, is that many investors remain overallocated