What Is a Vulture Fund?

A vulture fund is an investment fund that seeks out and buys securities in distressed investments, such as high-yield bonds in or near default, or equities that are❀ in or near bankruptcy. The goaﷺl is to 'swoop in' and pick up underpriced shares that are perceived to have been oversold to make high-risk but potentially high-reward bets.

Understanding Vulture Funds

Vulture funds take extreme bets on 澳洲幸运5开奖号码历史查询:distressed debt and high-yield investing, also deploying legal actions in their management strategies to obtain contracted payouts. These funds🌺 are typically managed by hedge funds using various types of alternative strategies to obtain profits for thei💧r investors.

To achieve the strategy, portfolio managers seek deeply discounted investments with high potential rates of return due to the high default risks. Generally, investments are focused on fixed income instruments such as high yield bonds and loans that pay fixed or variable interest rates. Oftentimes, the investments will be in 澳洲幸运5开奖号码历史查询:government debt of distresse🔯d cou🔜ntries, which requires even greater lobbyist involvement in resolving unpaid debts.

A number of involving hedge funds and sovereign debt highlight the processes and p💛rocedures that vulture funds undergo to♌ receive payouts for invested assets.

Argentina’s Debt Crisis

After 15 years of negotiations ending in February 2016, Argentina agreed to repay six vulture funds that had invested in the country's debt. Leading hedge funds involved included Elliott Management’s NML Capital unit and Aurelius Capital Management. The final payout on the debt to the bondholders was negotiated at $6.5 billion.

Puerto Rico’s Debt Crisis

A similar situation emerged in Puerto Rico, facing acute budgetary crises in 2006-2007 and from 2013-2016 when 澳洲幸运5开奖号码历史查询:the U.S. territory has filed for bankrupܫtcy. The country owed as much as $120 billion in bond and pension debt to its creditor🍷s, which included U.S. mutual funds and hedge fund managers. Leading fund managers seeking repayment included Oppenheimer, Franklin, and Aureliu🌜s Capital Management.

As a result, the e Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), was enacted in 2016 to restructure the territory's debts and adjust its budget. Most of Puerto Rico's debts incurred in the 2010s are undergoing one of the largest restructurings of public debt in U.S. history, with vulture funds having played a prominent role in the debt restructuring.

Vulture Fund Investments

While Argentina and Puerto Rico are extreme cases, they highlight some of the investments made by vulture funds resulting in substantial gains. In addition to government debt, real estate properties and highly leveraged firms are also top inv🌠estments for vulture funds. These funds are often willing to patiently wait for payouts resulting in substantial returns.

Vulture funds use alternative investing strategies, seeking bargain discount prices with substantial expected returns. Some people have looked down upon investment companies that oper🍒ate like vulture funds, since they prey on the cheap debt of struggling investments, forcing companies to make payouts 💖plus interest.

Overall, vulture funds and vulture fund management are not typically for the 澳洲幸运5开奖号码历史查询:risk-averse. Across the U.S. there are several investment managers who engage in this type of investing. Some of the most popular include Autonomy Capital, Canyon Capital, Monarch Alternative Capital, and Aurelius Capital Manage👍ment.

Vulture Capitalists

A 澳洲幸运5开奖号码历史查询:vulture capitalist is a type of 澳洲幸运5开奖号码历史查询:venture capitalist who specifically looks for opportunities to make money by buying poor or distressed firms. They are also known for taking control over someone else's innovations and, as a result, the money that person would have acquired𝔍 from those innovations.

The term is slang for someone who is an aggressive venture capitalist, and as such is believed to be predatory in their nature. Just like the bird they are named after, vulture capitalists will wait until they see the right opport▨unity and swo🃏op in at the last minute, taking advantage of a situation with the lowest possible price.  

Vulture capitalists are often criticized for their aggressive behavior because they are seen as preying on the companies they buy in order to make a profit. They are called out because they will seek out the most distressed companies at really low prices. They will go to great lengths in order to keep their costs down so as to make the most profit. A venture capitalist may look first at cutting down staff, which can lead to 澳洲幸运5开奖号码历史查询:unemployment a♛nd cause a ripple effec♊t in the economy.