Distressed Debt: A New Way to Categorize Managers

As the economic cycle progresses, the next recession draws inexorably closer and brings with it the next downturn in the credit cycle. Recognizing this, institutional investors are increasingly considering allocations to distressed debt managers. While lumping all distressed managers into one group is tempting, different managers have meaningfully different approaches that are not captured by considerations like geographical or vintage year diversification. However, when combining three complementary sub-strategies and identifying distressed managers in three different ways can help investors to better differentiate and more constructively allocate through the credit cycle.