[vc_empty_space height=”10px”]
The coronavirus crisis has resulted in an unprecedented number of defaults and presents an opportunity of a life time for distressed debt investors. Where are the opportunities and how should investors allocate capital both domestically and internationally?[vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Victor%20Khosla%22%2C%22job_role%22%3A%22Founder%2C%20SVP%20Global%20(United%20States)%22%2C%22content%22%3A%22Victor%20Khosla%20established%20SVPGlobal%20in%202001%20and%20has%20built%20it%20into%20one%20of%20the%20major%20firms%20in%20distressed%20debt%20and%20private%20equity%20investments%20with%20%248.4%20billion%20in%20assets%20under%20management.%5CnKhosla%20has%2029%20years%20in%20the%20industry.%20He%20got%20his%20start%20at%20Citibank%20(1989-1993)%20and%20subsequently%20built%20and%20managed%20the%20distressed%20proprietary%20trading%20business%20at%20Merrill%20Lynch%20(1993-1998).%20At%20the%20time%20of%20his%20departure%20from%20Merrill%20Lynch%2C%20Khosla%20had%20investment%20authority%20for%20%242%20billion%20in%20corporate%20and%20real%20estate%20investments%20and%20headed%20a%20team%20of%2040%20analysts%20and%20traders%20based%20in%20New%20York%2C%20Tokyo%2C%20London%20and%20Hong%20Kong.%20After%20leaving%20Merrill%20Lynch%2C%20he%20had%20leadership%20roles%20at%20two%20well-known%20funds%3B%20he%20was%20president%20of%20Cerberus%20Capital%20(1998-1999)%20and%20ran%20MooreSVP%20(1999-2002)%2C%20a%20JV%20with%20Moore%20Capital%2C%20which%20invested%20in%20distressed%20debt%20in%20Japan.%5CnKhosla%20graduated%20with%20a%20first%20class%20Bachelors%20of%20Commerce%20(Honors)%20degree%20from%20Delhi%20University%2C%20a%20MA%20in%20Economics%20from%20Vanderbilt%20University%2C%20as%20well%20as%20a%20MBA%20from%20the%20University%20of%20Chicago.%20He%20is%20a%20member%20of%20the%20management%20council%20at%20the%20University%20of%20Chicago%20Booth%20School%20of%20Business.%5Cn%22%2C%22image%22%3A%2231926%22%2C%22linkedin%22%3A%22%22%7D%5D” title=”Speaker” el_class=””][vc_quotes layout=”accordion” quotes=”%5B%7B%22name%22%3A%22Amanda%20White%22%2C%22job_role%22%3A%22Director%20of%20institutional%20content%2C%20Conexus%20Financial%20(Australia)%22%2C%22content%22%3A%22Amanda%20White%20is%20responsible%20for%20the%20content%20across%20all%20Conexus%20Financial%E2%80%99s%20institutional%20media%20and%20events.%20In%20addition%20to%20being%20the%20editor%20of%20Top1000funds.com%2C%20she%20is%20responsible%20for%20directing%20the%20global%20bi-annual%20Fiduciary%20Investors%20Symposium%20which%20challenges%20global%20investors%20on%20investment%20best%20practice%20and%20aims%20to%20place%20the%20responsibilities%20of%20investors%20in%20wider%20societal%2C%20and%20political%20contexts.%20She%20holds%20a%20Bachelor%20of%20Economics%20and%20a%20Masters%20of%20Art%20in%20Journalism%20and%20has%20been%20an%20investment%20journalist%20for%20more%20than%2025%20years.%20She%20is%20currently%20a%20fellow%20in%20the%20Finance%20Leaders%20Fellowship%20at%20the%20Aspen%20Institute.%20The%20two-year%20program%20seeks%20to%20develop%20the%20next%20generation%20of%20responsible%2C%20community-spirited%20leaders%20in%20the%20global%20finance%20industry.%22%2C%22image%22%3A%2231864%22%2C%22linkedin%22%3A%22https%3A%2F%2Fwww.linkedin.com%2Fin%2Famanda-white-101a7515%2F%22%7D%5D” title=”Moderator” el_class=””][vc_empty_space height=”10px”]
Key takeaways
The high yield and leveraged loan market size has doubled since the GFC.
Today prices will not fall as low as they did in the GFC. This opportunity set is not as deep as 2008, it is a 3 to 6-month window.
We believe the European trough is lower and the recovery is longer.
It is important to decide what not to do:
In certain regions such as France or Italy, the laws are not conducive to the restructuring process
In emerging markets it can be extremely difficult to seize the steering wheel and navigate the restructuring journey
There is a lot of low hanging fruit in restructuring from an operational perspective.
In the last 8 years there has not been huge opportunity or activity in the distressed space, but in the last 4 months the market has exploded.
In 2008 the rising tide lifted all boats. Today, you must be smarter, more focused and more skilled to invest successfully.
The distressed space offers a very comfortable discount cushion, which alleviates risk if the recovery is slower than hoped.
[vc_empty_space height=”10px”]
Poll results
Are you increasing your allocation to distressed debt opportunities as a result of COVID-19?[vc_line_chart x_values=”” values=”%5B%7B%22title%22%3A%22Yes%20(43%25)%22%2C%22y_values%22%3A%2243%22%2C%22color%22%3A%22blue%22%7D%2C%7B%22title%22%3A%22No%20(43%25)%22%2C%22y_values%22%3A%2243%22%2C%22color%22%3A%22pink%22%7D%2C%7B%22title%22%3A%22Unsure%20(14%25)%22%2C%22y_values%22%3A%2214%22%2C%22color%22%3A%22sandy-brown%22%2C%22custom_color%22%3A%22%230088cc%22%7D%5D”]
The Florida State Board of Administration has made some strategic moves to take advantage of opportunities in the dislocation, including in private equity, distressed debt and active listed equities.. But CIO, Ash Williams, is concerned about the underlying real economy.
In the first of four articles looking ahead to FIS 2020, we highlight how the event will focus on de-globalisation and geopolitical stress, particularly the deteriorating relationship between China and the US. Elsewhere, FIS delegates will hear how asset owners are positioning their portfolios in today's challenging environment.
The Future of the Corporation programme is the British Academy's review of the role of business in society. It combines research from a range of academic disciplines with insight from senior business and policy leaders.
A new report by Mercer, COVID-19 – Investment Governance and Strategy to Navigate a Pandemic-Driven Market Crisis, examines how large asset owners are finding ways to pursue attractive risk-adjusted investment returns while also taking investment actions to help mitigate and address the impact of the COVID-19 pandemic through investment governance.
Unemployment is a policy choice, according to Professor Bill Mitchell, the father of Modern Monetary Theory (MMT). He says there is no reason that unemployment should be at the current levels.
APG and CalSTRS are leading a collaboration with PRI that provides investors with ESG-related questions to ask investee companies about their responses to COVID-19.
During the current COVID 19 environment, investment in infrastructure should be leveraged as an opportunity to keep people employed, keep businesses afloat and to maintain the productive capacity of the economy.
Leave a Comment
You must be logged in to post a comment.
Login