Hedge funds are impressed with all things distressed this year, according to a new report.
A survey of hedge fund managers shows across-the-board increases in interest in investing in both distressed debt and equity over the next 12 months. Some 65% of the 120 respondents to the Reuters HedgeWorld & Dykema 2010 Insolvency Outlook Survey are currently invested in distressed companies, up from 53% last year. Nearly one-third of those managers have at least one-fifth of their assets in distressed debt, up from just 10% at the beginning of 2009.
Most hedge funds expect to keep their debt investments this year. But 39% plan to sell this year, up from 23%. At the same time, more hedge fund firms are buying unsecured debt than last year.
On the equities front, nearly half of the hedge funds surveyed have bought distressed stocks over the past year, up from 41%.
Most of the hedge fund managers surveyed believe that distressed risk profiles will be flat or will decline this year.