Financial distress can be a profitable alternative investment, provided you have the cash to rescue otherwise viable companies from a financial pinch or even circumstantial bankruptcy. Sponsors of distress debt funds have been stockpiling cash in anticipation of the next economic downturn and are now armed to the teeth with the financial resources to profit by aiding troubled companies struggling to pay their obligations. What they could not have anticipated is that the United States was in the midst of its longest economic recovery and expansion in the country’s history, and now it is the holders of distressed debt funds in need of relief.
Investors have committed $136 billion to the cause since just 2017, according to Preqin. But, having grown weary of waiting for returns on those commitments, investors have been in speedy retreat, putting the distressed debt business on track to record its worst fundraising year since 2009. A mere four distressed debt funds have raised o
