During the first quarter of 1996 Hedge funds soaked up $24 billion in investments, according to Hedge Fund Research in Chicago, which brings the industry total to $1.18 trillion. Research from Standard & Poor’s states that Distressed Bonds eased in April to 434% of all junk bonds, which is a drop from 5.5% in March, and 5.7% in February. Since this rate is noticeably lower than last year, analysts do not expect to see an increase any time soon in the overall distressed-debt ratio.
Dalton Investments, a $1.3 billion Los Angeles-based hedge fund company, said Monday it is closing its two distressed debt funds and returning $300 million to investors, citing a lack of foreseeable opportunities in the sector. They are not the only ones – other distressed debt managers have complained of a lack of opportunities even amid a wave of new entrants.
Defaulted debts are now over 60 cents on the dollar, up from what was closer to 15 or 20 cents. Howard Marks, CEO of $30 billion Los Angeles-based Oak Tree Capital spoke to Forbes a couple months ago about the fact that the distressed-debt market has been challenging and he does not expect to see improvement any time this year. ■
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