< meta name="DC.Date.Valid.End" content="20050825"> Amendment Nine: Distressed? Sure thing!

Monday, November 08, 2004

Distressed? Sure thing!

Everyone knows this year has been pretty lousy for hedges. Yet distressed funds are posting solid returns. According to Hedgefund.net's distressed index, vultures are posting close to 12% this year. Not too bad. Here's what is strange though. While vultures don't typically fly in cycles, one can predict with some accuracy a good from a bad year. This was supposed to be a bad year. What happened? Well, first off, we aren't pulling 30% like last year. Secondly, investors are pulling money out of all hedges and plowing it back in equities. This is fine by vultures as we typically like small crowds and there's more to eat when fewer are around. But I'll go ahead and say it, the most important thing that's happened this year for vulture funds is the following: geopolitical instability. Some may say I'm crazy, but from the bird's eye view, the whole distressed market is simply a play on how peaceful and sane the world is. The less of that, the more return. The more of it, the less return. Viva Bu$h!