By David Turner
Europe’s debt crisis is bad news for many investors, but for distressed funds looking to scoop up assets at bargain prices, it may have spawned the opportunity of a lifetime. European banks are eager to shed distressed assets and trim their balance sheets, and the yawning gap between gargantuan supply and hitherto muted demand could allow those bold enough to venture in to earn eye-catching returns, fund managers say.
“The current opportunities are several orders of magnitude greater for distressed investors than anything we’ve seen before, simply because of the scale of the economic problems,” says Iain Burnett, head of distressed debt at London-based BlueBay Asset Management, which runs $38 billion, including $1.5 billion in hedge funds and alternative strategies.
A recent Morgan Stanley report estimates that European banks will need to reduce their leverage by as much as €4.5 trillion over the next...