Los Angeles-based hedge fund Glendon Capital Management is positioning itself to capitalise on what it sees as the slow unraveling of the private equity boom, as liquidity pressures mount and sponsors struggle to exit ageing investments, according to a report by Bloomberg.
Holly Kim, co-founder of Glendon Capital, said in an interview that the firm sees rising opportunity in the distressed debt space as private equity firms face mounting pressure to realise returns from deals made during the pandemic-era buying frenzy. Many GPs are “unable or unwilling” to exit investments despite buoyant equity markets, she noted, leaving limited partners anxious and increasingly open to offloading positions at a discount.
Founded in 2013 by former Oaktree Capital executives Kim, Matt Barrett, and Brian Berman, Glendon Capital manages approximately $5bn with a pure focus on distressed and special situations. Its flagship hedge fund, Glendon Opportunities Fund II, posted a net IRR of 16.4% as of March and has fully returned investor capital while continuing to monetise positions. The firm’s Fund III, sized at $1.7bn, delivered a net IRR of 22.1% with wins in names such as Frontier Communications, Talen Energy, Revlon, and Intelsat.
Kim noted that the smaller size of Fund III reflects Glendon’s tactical approach with the firm ‘right-sizing’ each fund to “math th opportunity set”.
While many sponsors are turning to liability management exercises (LMEs) to buy time, Kim warned that such manoeuvres often delay the inevitable with many borrpowers going bankrupt anyway. Glendon’s preferred approach is to enter post-LME when the capital structure is clearer and outcomes more predictable.
Broader macro headwinds meanwhile, including high interest rates, tariff shocks and rising AI-driven capex, are poised to generate a fresh cycle of distressed opportunities, according to Kim.
