The potential to buy company debt at reduced prices as central banks tighten monetary policy, will see hedge fund investors ramp up their allocations to distressed credit next year, according to a report by Reuters.
The report cites a recent survey by BNP Paribas as suggesting that allocations to hedge funds focused on US corporate debt are expected to increase by 35% over the next 12 months compared with year-to-date allocations, and by 29% for those focused on European credit.
Emerging markets credit allocations will also see a lower 5% increase compared with this year’s 7% cut in exposure.
Of the investors polled for the survey, half say they plan to increase allocations to distressed credit hedge funds which look to buy the debt of financially troubled companies because their higher risk of insolvency can generate more attractive returns.
The survey was based on data from 90 investors that collectively invest in or advise on $380 billion in hedge fund assets.
