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July 27, 2006
Hedge Fund Industry Moves into Distressed Debt Trading
You may be curious to know what exactly distressed debt trading is. Distressed debt trading establishes common standards of practice for trading, clearance and settlement of distressed bonds. The common procedures associated with distressed debt trading cover various terms and situations that arise in distressed debt trading. Interestingly, it has been noticed that big hedge fund management companies are now looking at ways to move into distressed debt trading. These big fund management firms are likely to add distressed debt trading to their product lines through acquisitions.
Such hedge fund investors are known as vulture funds. They buy bonds of ailing or bankrupt companies and expect to extract maximum benefits by taking control of a company through a debt-for-equity swap. This market is primarily dominated by hedge funds or investment bank traders who have perfect trading skills to make a profit. Is it really safe for hedge funds to move into distressed debt trading? Only the time will tell.
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