Published by BarclayHedge, Ltd.
800-338-2827 or 641-472-3456
V O L U M E 2 2 , N U M B E R
BARCLAY ROUNDTABLE
Distressed Securities Funds Gain
31% in 2009, 6.5% in Q1
Is the Easy Money Off the Table or Is this the
Beginning of a New Multi Year Trend?
Chances are the world would just as
soon forget the 2008 market turmoil that
sent the global economy into a spiral and
may have forever changed the way that
global markets operate. The strong
rebound that has ensued through the
first quarter of 2010, along with an
improving economic picture, certainly
has gone a long way toward sending that
episode into the history books.
Healthy aftermath are words that are
rarely uttered in tandem, but they may
best describe where we are today
because of 2008. Significant excesses
have been removed from the markets,
valuations of many securities have
returned to realistic levels, and much
needed regulatory reform may be on the
way. As a corollary to healthy aftermath,
weak companies with no prospects have
been forced to disappear, while promis-
ing companies, albeit temporarily
bruised, offer significant opportunities
in the form of distressed investment
strategies.
Since declining by 31.70% in 2008, the
Barclay Distressed Securities Index has
gained 30.89% in 2008 and an additional
6.55% in the first quarter of 2010. Has the
easy money been taken off the table or
are we still in the early stages of a much
larger trend?
To the untrained eye, today’s dis-
tressed environment may appear too
complex and beyond the scope of ability
BARCLAY MANAGED FUNDS REPORT n (641) 472-3456
2 2 n d
for the average investor. To the experi-
enced distressed hedge fund manager,
however, the current opportunity set is
unprecedented and ripe with profit
potential. To discuss the current environ-
ment for distressed investing and review
the opportunity set in more detail we
have assembled a panel of expert man-
agers. Our panel includes;
Oren M. Cohen, Brownstone Asset
Management, L.P. Mr. Cohen is the
founder and Head Portfolio Manager at
Brownstone. He has over 20 years of
experience in the financial markets,
mostly focused on the high yield and
distressed securities markets. Mr. Cohen
holds an MBA in finance from the
Wharton School (1987) and a BA in eco-
nomics from Columbia University
(1981).
Howard Golden and Kevin Wyman,
Southpaw Asset Management, L.P.
Messrs. Golden and Wyman are the
founders and portfolio managers for
Southpaw. Immediately prior to forming
the Partnership, they served as
Managing Directors of Ramius Capital
Group, LLC for five years, during which
time they cofounded and headed the
RCG Carpathia Master Fund, Ltd. and its
related assets. Mr. Golden received his
BS in Accounting from New York
University and his MBA in Finance from
Cornell University’s Johnson Graduate
School of Management. Mr. Wyman
n www.BarclayHedge.com
Q U A R T E R 2 0 1 0
received his BA in Economics from
Brown University and his JD from the
University of Wisconsin-Madison.
Robert L. Rauch, Gramercy Advisors
LLC. Mr. Rauch is a Partner and Director
of Research of Gramercy. Gramercy is an
event-driven hedge fund with US$ 2.6
billion of funds under management spe-
cializing in opportunistic corporate and
sovereign investments in global emerg-
ing markets. Mr. Rauch oversees research
and the corporate restructuring activities
of Gramercy, chairs the Investment
Committee, and serves as portfolio man-
ager for several Gramercy funds.
Q : The market turmoil that occurred
in 2008 created an unprecedented
level of default activity among US com-
panies. In your opinion what is the cur-
rent opportunity set for companies cur-
rently in distress, but possessing a high
probability of improving their earnings
and balance sheets to eventually
emerge from distressed status? Please
discuss the opportunity set for compa-
nies that are in, or are likely to enter,
bankruptcy but have a potential for a
favorable restructurings. What percent-
age of the universe does not ultimately
represent viable investment situations?
Cohen: With the dramatic tightening
of credit spreads and reemergence of
vibrant capital markets for issuance of
below investment grade securities, the
opportunity set for pure long-biased dis-
tressed investments has diminished sig-
nificantly over the past 12 months. We
believe that the most compelling long
opportunities are in credits of companies
well through their restructuring process-
es where significant upside can be real-
ized from investing in fulcrum securities
that are likely to obtain substantial equi-
ty in the reorganized entities. Generally,
we continue to see significant valuation
discounts between these distressed
1
entities and their healthier competitors
that trade in the public equity markets.
However, one must be very careful at
this point to select companies and indus-
tries that can benefit from only a slowly
improving economic backdrop. In some
industries, like advertising based media
or basic commodities, we may be look-
ing to hold back-end equity for one to
two years post-emergence to realize the
full upside from the trade.
At Brownstone, we are fortunate in
that our strategy allows for full direc-
tional flexibility. In other words, rather
than limit ourselves to the deep value
long-biased trade in distressed, we also
continually look for shorting opportuni-
ties in companies with stressed balanced
sheets in declining industries. The cur-
rent period of extreme monetary easing
has “kicked the can down the road” for
many stressed credits that likely would
have filed already absent such accommo-
dation. Also certain sectors in secular
decline (for example newsprint, directo-
ry publishing, video rental chains, etc.)
may have rallied mistakenly in the cycli-
cal upturn, presenting new shorting
opportunities for us.
Golden/Wyman: As it was unfolding,
we heard many characterize the credit
crisis as a black swan event. While we
will not rehash all the causes here (hous-
ing bubble, excessive leverage, etc.), our
view is that it is hard to make the case
that anything but cause and effect were
at work. In fact, we would argue that if
anything over the last few years was a
black swan event, it was the ferocity of
the market rallies we have seen over the
last year or so. One of the consequences
of this rally is that many companies
which were likely to default in the midst
of the credit crisis have been able to take
advantage of the enormous technical
momentum in the high yield market to
refinance and push out their maturities.
Time will tell if they are ultimately able
to grow into their capital structures and
avoid restructuring. We suspect many
will not. As a result, we think some of
the more interesting distressed opportu-
nities will come from companies that
have actually staved off a restructuring,
albeit temporarily. We expect this to be
2 www.BarclayHedge.com
particularly fertile territory, as there are
many fundamentally sound companies
that simply drank too deeply from the
well of available debt financing in the
period leading up to the crisis.
Reorganizations, of course, were
designed for just these types of situa-
tions. On the other side of the equation,
there are companies whose long term
viability we question, especially those
who have filed for bankruptcy multiple
times. We expect many of these will not
be able to reorganize and will go directly
Oren M. Cohen
Brownstone Asset Management, L.P.
“...the opportunity set for pure long-biased
distressed investments has diminished
significantly over the past 12 months.”
to liquidation, which is an area in which
we specialize. Either way, we look for-
ward to taking advantage of the pricing
inefficiencies that a reorganization or a
liquidation can create. We believe this
opportunity set will be particularly
plentiful in lesser known, smaller situa-
tions (total debt in the range of $250 mil-
lion to $1 billion) where the pricing inef-
ficiencies tend to be greatest.
Rauch: We currently see a far more
limited number of distressed opportuni-
ties in the US high yield and loan mar-
kets than we would have previously
expected. The unprecedented monetary
intervention in the credit markets and
the resurgence of debt issuance in 2009
n (641) 472-3456
enabled many distressed issuers to refi-
nance and avoid default. Last year,
JPMorgan estimates there was $164 bil-
lion in new US high-yield bond issues,
surpassing the previous record of $158
billion in 2004. The amount of US high-
yield bonds trading at distressed levels
(defined as 1,000 bps over US treasury
yields) fell to $4.2 billion as of 1Q10 from
$233.1 billion in 4Q08, while the corre-
sponding default rate dropped to 0.2% in
1Q10 from 16.9% in 1Q09. While activity
is fairly muted right now, we believe
there is a second wave of defaults in the
US and Europe which will result from
the legacy of the leveraged buyout boom
of the mid-1990s. From 2002-2007, new
issue LBO loans in the US grew over
nine-fold to $295 billion, according to
JPMorgan. The total US leveraged loan
market grew over 120% between 2002
and 2008, totaling $1.6 trillion at
December 31, 2008. This compares to a
US leveraged loan market size of $734
billion in 2002, and only $150 billion in
1993. Debt-to-EBITDA ratios for all new
US LBOs increased substantially from
3.9x in 2002 to 6.0x in 2007. With much of
this debt issued on a LIBOR based
spread which has limited debt service
pressure, and under “covenant lite”
structures that have not triggered the
usual technical defaults, we expect that
many corporates will fail to meet maturi-
ties as their initial five to seven year
financings come due in 2012-2014.
In the emerging markets, our primary
area of focus, we believe that the driver
for corporate defaults will be the limited
access to financing or refinancing by
high-yield issuers. Although there were
$136.6 billion in new corporate issues in
2009, slightly below the $153.2 billion
record of 2007, fully 78% of this was to
investment grade issuers or quasi-sover-
eigns. Moreover, we do not see interna-
tional banks resuming lending to any
but the bluest chip emerging markets
corporate borrowers as banks rebuild
their capital in anticipation of the
impending developed world LBO bust
to come. We believe that credit risk
appetite in emerging markets will
remain limited and thus lead to restruc-
turings as maturities come due.
n BARCLAY MANAGED FUNDS REPORT
 Q : Senior secured bank debt has
been an area of strong interest for
hedge fund managers following a sig-
nificant amount of liquidity-based sell-
ing that occurred in 2008. Despite sit-
ting at the top of the capital structure,
however, senior secured bank debt can
still represent a risky investment when
the borrower is in distress. What are the
key determinants in distinguishing an
attractive high yield bank debt invest-
ment from a potentially problematic
distressed situation? Given the
strong returns in this area of the
market in 2009, to what extent
has the easy money been made?
Cohen: We have been active
participants in this layer of the
capital structure as the most recent
LBO cycle of 2004-07 layered
unprecedented amounts of
secured debt on corporate balance
sheets, often leaving little value
below the banks when things go
badly. We do not regard bank debt
as a separate asset class. Rather,
we believe that each analysis must
entail a thorough examination of
all layers of a company’s capital
structure to determine the pivotal
layer where an investor can realize
the highest risk-adjusted return.
Therefore, we only find value
even at this uppermost layer of a
capital structure if the price we are
paying offers a significant enough
discount to our assessment of a
company’s enterprise value to provide
us with a sufficient return. Depending on
specific risks, we generally target returns
of at least 20% when entering any dis-
tressed investment. We are also finding
attractive liquidation opportunities
where companies are paying down sen-
ior debt fairly quickly with proceeds of
asset sales and receivables collections. In
some of these cases we may accept lower
returns because of the clarity of the asset
values and paydowns.
Golden/Wyman: Unfortunately, sen-
ior secured bank debt is just a phrase
that describes a type of bank debt facility.
While the label conjures up feelings of
security, it does not by any stretch of the
BARCLAY MANAGED FUNDS REPORT n (641) 472-3456
imagination guarantee 100% principal
recovery. As a matter of fact, from 2004
through the beginnings of the credit cri-
sis in the summer of 2007, bank debt
issuance increased so much and grew to
be such a large part of many individual
corporate capital structures that we
often refer to it as “high yield bonds
with a bow tie”. The harsh reality is that
any senior secured facility is only pro-
tected by the value of the collateral and
the cash flow of the underlying busi-
Howard Golden and Kevin Wyman
Southpaw Asset Management, L.P.
“Clearly, there was easy money made in 2009 as the
‘asset class’ was once again in vogue and pricing
moved almost indiscriminately upwards.”
ness, regardless of how much was bor-
rowed. For the last few years, we have
been amazed at how many in the market
have misunderstood this important fact
and filled portfolios with secured bank
debt, because of the perceived safety in
the label, only to be surprised when the
music stops and substantial losses
result. When we look at this type of
investment opportunity, we focus on
downside protection and collateral
value. Our ability to access the collateral
and, if required, monetize it is an impor-
tant element of this analysis. Strong, sta-
ble earnings, operational soundness,
and the quality of the management team
are also major factors. When reviewing
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these types of investments, one has to
bear in mind the high price levels at
which most names in the space are cur-
rently trading. As a result, the upside is
somewhat limited, so you do not want
to take much, if any, risk to earn these
relatively low rates of returns. Clearly,
there was easy money made in 2009 as
the “asset class” was once again in
vogue and pricing moved almost indis-
criminately upwards. Now, as many
bank debt names are back to their pre-
crisis levels (somewhat shock-
ingly given lower LIBOR lev-
els), one has to be selective and
not buy the “asset class”. We
focus on individual capital
structures and buy bank debt or
bonds that are fundamentally
appealing based on the specific
credit. If you dig hard enough
and have a broad enough
opportunity set as we do, there
are plenty of interesting oppor-
tunities.
Rauch: Given the large
investment inflows into corpo-
rate bonds since early 2009,
there remain few, if any, attrac-
tive investment opportunities in
secured bank debt. Although we
do not consider secured bank
debt in the US as a particularly
risky investment from a proce-
dural or legal point of view,
there are still risks of returns
being limited due to competi-
tion for secondary market paper
or from extended restructuring periods
due to the complexities of capital struc-
ture. Also, with leverage in many deals
reaching 7-9x EBITDA at the end of the
cycle, there is the potential for far less
cushion under the senior secured debt in
the capital structure and the potential
for deficiency claims in more extreme
cases, especially where the value of col-
lateral may have been eroded. In emerg-
ing markets, we usually do not attach
much value to secured claims relative to
unsecured claims. At best, secured
claims provide you with better negotiat-
ing leverage in restructuring situations.
The bankruptcy regimes in many emerg-
ing markets rarely fully recognize the
3
 rights of secured creditors. In the few
instances that they do, debtors often use
legal tactics to delay foreclosure or liqui-
dation for a long time. As a result, a key
factor in our investment vetting process
is the jurisdiction of the issuer or the
security. There are countries that are still
developing their bankruptcy laws, such
as the UAE, and others that have an
unfavorable track record in recognizing
secured claims by foreigners, such as
Indonesia.
Q : In distressed situations where
bankruptcy is not imminent, equi-
ties, derivatives or other portions of the
capital structure may be feasible for
hedging positions. Given that bank-
ruptcy workouts naturally result in a
complete reconfiguration of a compa-
ny’s capital structure, discuss any
viable means for hedging positions in
a typical bankruptcy workout. Explain
any current or prospective legislation
that may further challenge this task.
Cohen: Typically, we do not get
involved in hedging risk in a specific sit-
uation with other securities related to
the same company. These so-called capi-
tal structure arbs can dramatically limit
the upside of a trade one has worked
very hard to get right. We are mostly sat-
isfied to place purely directional bets on
a single name while perhaps hedging
out industry risk by shorting securities
of a company in the same sector with
negative fundamental catalysts. Where
we like a company and its industry sec-
tor, we seldom hedge. Cap structure
trades become interesting to us in more
complicated capital structures where we
might recognized the potential for a sen-
ior security to appreciate to the detri-
ment of a more junior security. In these
cases, we actually seek to generate posi-
tive returns from both the long and the
short positions.
Golden/Wyman: Hedging a position
in a bankruptcy investment in today’s
environment has become very difficult.
As markets continue to move upwards,
lower and lower parts of the capital
structure compete on valuation and
rights offering plans. The problem
caused by this dynamic is that while one
4 www.BarclayHedge.com
day you could hedge out some of your
exposure with a clearly subordinated
piece of the capital structure, the next
day there is a rights offering proposed by
that group and you get caught in a short
squeeze. In addition, the long side of
your holding can actually go down in
this case, as many times an equity com-
ponent is part of the current trading val-
uation, and that component is now
removed due to the rights offering. One
also wants to be careful hedging bank-
ruptcy positions by shorting securities of
Robert L. Rauch
Gramercy Advisors LLC.
“In emerging markets, there are limited
opportunities to directly hedge a distressed
investment through derivatives, equities,
or structured investments. However, a key
business risk for many emerging markets
corporates is country risk...”
a non-bankrupt competitor or shorting a
commodity that the bankrupt company
produces. We believe these hedges often
give a false sense of security. For exam-
ple, many bankrupt companies will
remain undervalued for some time due
to a lack of sell side coverage. As a result,
one may not see any correlation to a non-
bankrupt competitor or an underlying
commodity which opens up the possibil-
ity of a lose-lose situation rather than an
effective hedge.
Rauch: In the US and Europe, the
markets are quite efficient and there are
n (641) 472-3456
few mechanisms to truly hedge expo-
sures. The credit default swaps (CDS)
market has actually introduced new
complexities as companies enter bank-
ruptcy proceedings. In emerging mar-
kets, there are limited opportunities to
directly hedge a distressed investment
through derivatives, equities, or struc-
tured instruments. However, a key busi-
ness risk for many emerging markets
corporates is country risk, which one can
hedge with sovereign CDS. In the past,
many companies have defaulted on their
bonds due to sudden devaluations,
nationalizations, or local financial crises.
Our investment experience has taught us
that it is prudent to hedge the country
risk in our emerging market invest-
ments.
Q : Post-reorganization equities rep-
resent an attractive investment
opportunity set, albeit at in increased
level of risk. What are the key factors to
evaluate in a restructuring that may
have a significant bearing on the suc-
cess or failure of a post-reorganization
equity investment? To what extent do
post-reorganization equities correlate
with other segments of the equity mar-
ket? How active are the derivatives
markets and short interest for post reor-
ganization equities?
Cohen: As we said earlier, we think
post-reorg equity plays represent some
of the best opportunities in today’s dis-
tressed universe. Generally, these types
of securities tend to trade pre-reorg at
significant discounts of public market
comps. Depending on the size of the
company and liquidity of the back-end
equity, we expect much of this gap to
close fairly quickly once the equity
begins to trade freely. However, with lit-
tle followed companies with smaller
capitalizations, it may take much longer
to realize a full valuation. As well, cer-
tain backend equities may remain stig-
matized for quite some time depending
on all the aspects of their bankruptcies:
Was fraud involved? How did manage-
ment conduct itself up to and through
the process? Who were the equity spon-
sors and are they still involved? How
does the restructured balance sheet and
n BARCLAY MANAGED FUNDS REPORT
 the company’s liquidity compare to the
public comps, etc.? On the positive side,
equity analysts are eager to pick up new
names trading at a discount in their sec-
tors, and this positive coverage for larger
cap names will generally succeed in clos-
ing the private/public valuation gap
rather quickly.
Golden/Wyman: Post reorganization
equities are like any other investment,
their attractiveness is predominantly
determined by the valuation at which
the opportunity is created. Generally we
are involved in post-reorganization equi-
ties created through pre-restructuring
debt holdings. From a process stand-
point, we tend to get active either on an
official or ad hoc committee basis and
are involved in every aspect of the
restructuring including reformulating
the board of directors. The success of
companies coming out of a restructuring
is not merely a function of its business
prospects or the economy as a whole. In
our view, management plays perhaps the
most significant role. As a result, it is
important for us to have an open dia-
logue with management. It greatly
enhances our analysis and the trans-
parency of the investment. The post-
reorganization capital structure, specifi-
cally how much debt the company is left
with after the restructuring, is also vital.
Most of the companies we stay involved
with have dramatically reduced their
debt load to a level that allows the com-
pany substantial time for a business
rebound. Many companies unfortunately
are burdened with very expensive
financing that strangles cash flow and
puts stress on operations immediately
upon emergence from a restructuring.
From a valuation standpoint, we create
our investment at what we believe is a
compelling discount to intrinsic value.
We stay extremely disciplined on a sale
of post reorganization securities once the
market pays us for this discount. We like
to call this the easy money. We let others
make the more difficult money that
comes with betting on an overall rising
equity market, multiple expansion, or
M&A activity.
BARCLAY MANAGED FUNDS REPORT n (641) 472-3456
Rauch: Marquis Research recently
reported that, in the current default
cycle, the median return for 18 post-reor-
ganization stocks they followed was
35%, which actually tracks the overall
market reasonably well. However, these
returns ranged from 3540% to -38%, thus
illustrating the risks involved. Our view
is that performance will be driven by
usual factors, such as the overall market,
point in the industry cycle, and the idio-
syncratic attributes of the company itself,
in addition to technical factors relating to
the trading strategies of the new share-
holders. In emerging markets, equity
components are usually not sought by
most creditors, given that it becomes
very difficult to displace controlling
shareholders, and public float is usually
very limited making it difficult to mone-
tize. As a result, it is common for credi-
tors to let the controlling shareholder
retain its equity ownership in exchange
for liens on the company assets or other
debt enhancements.
Q : Public companies generally gar-
ner the most press when it comes
to notable default and bankruptcy
activity. Privately held entities, howev-
er, have not been immune to the histori-
cally high levels of default and bank-
ruptcy activity over the past 18 months.
To what extent are private distressed
situations an attractive opportunity set
for hedge funds? How does the liquidi-
ty profile of these situations differ from
their public counterparts? Compare and
contrast the exit strategies between typ-
ical public and private distressed and
bankruptcy situations.
Cohen: All things equal, private com-
pany bankruptcies should trade at
greater discounts than their public coun-
terparts, providing greater upside oppor-
tunities. Given the generally high lever-
age through all the layers of debt securi-
ties in distressed credits, it is rare for the
equity tranche to retain anything more
than nuisance value in either the public
or private cases, so the analysis of these
situations is very similar. Private compa-
nies may also present greater complexity
when the equity sponsors accumulate
large interests in certain tranches of debt
n www.BarclayHedge.com
of their portfolio companies to protect
their interests. In these cases, identifying
fulcrum securities with highest return
potential may have more to do with
understanding the underlying interests
of all the players than with investing
solely on fundamental value.
Golden/Wyman: Private distressed
situations can offer superior risk-reward
opportunities to public situations, prima-
rily due to less competition and the
resulting price inefficiency. Within the
definition of privates, however, there are
different types of investments. Some are
still syndicated and traded among a
smaller group of parties. Others are more
akin to private equity with few holders
(or even just one), thus severely limiting
liquidity. We have historically not partic-
ipated in many situations that mirror pri-
vate equity, as the risk-reward dynamic
and total lack of liquidity have often
made the situation less attractive than
others we pursue. The private situations
that we do participate in are either capi-
tal structures that are bank debt domi-
nant (no public securities) or public com-
panies that go through a bankruptcy
process and stay private upon emer-
gence. In either case, they are traded
actively by brokers. The private restruc-
turing process is often similar to more
public situations, maybe even easier or
faster given the smaller number of par-
ties involved. This increased efficiency
can result in lower restructuring costs,
thus preserving more value for the inter-
ested parties rather than the outside pro-
fessionals.
Rauch: The large monetary inflows
into most asset classes and subsequent
contraction in yields have led many
hedge funds to seek higher returns in the
private markets. Distressed debt of pri-
vate companies usually trades at a dis-
count to that of public companies, as
these tend to be more illiquid and have
lower financial disclosure requirements.
Monetizing private equity takes a far
more strategic approach, although a
number of funds pursue an activist
strategy of investing in defaulted debt in
order to get a significant control stake in
private equity.
5

Q : So much attention has been
focused on the US economy and
the default and distressed situations in
the US. Globally, however, a number of
governments and companies within
certain markets have also experienced
distress. Please discuss the opportunity
set outside of the US for distressed
investing. Which sovereign debt situa-
tions are most attractive and why?
Which markets have the most attractive
corporate distressed situations?
Discuss the risk-reward tradeoff in
emerging market distressed situations.
Cohen: We invest preponderantly in
North American companies with some
flexibility to invest in developed coun-
tries. We do not invest at all in emerging
markets.
Golden/Wyman: We are primarily a
US focused fund and have only partici-
pated in the sovereign market through
CDS as a way to provide macroeconom-
ic protection to the long side of the port-
folio. We will likely benefit from the
problems overseas as investment dollars
move from those areas into the more sta-
ble US capital markets providing contin-
ued positive momentum both for new
issues and existing securities. We believe
in order to be a successful distressed
investor you need to have a deep expert-
ise in your particular market. Our focus
and edge is in the US where we have
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intimate knowledge of the bankruptcy
code and process, a unique network of
bankruptcy lawyers and restructuring
advisors built over our combined 40
years in the business, and long-standing
relationships with US based sell-side
shops to source product. Simply put, we
play to our strengths, and our strengths
are here in the US.
Rauch: In the case of emerging mar-
kets, the majority of defaults and dis-
tressed situations to-date were driven by
financial market volatility and its impact
on currencies and commodity prices,
rather than high leverage, and by the
limited ability for high-yield issuers to
obtain a refinancing of maturities.
Today, the pipeline of opportunities for
distressed investing in emerging mar-
kets remains very attractive. On the sov-
ereign side, we recently completed the
restructuring of Cote d’Ivoire, and the
Argentine authorities just announced
that they were launching a debt
exchange offer to restructure the US$20
billion of their debt that is still in
default. Despite the healthier balance
sheets of emerging market corporates vs
developed world counterparts, these are
still highly dependent on availability of
capital flows from foreign markets.
Emerging markets issuers face a signifi-
cant amount of debt that needs to refi-
nanced in the near term. ING estimates
that 33% of the total emerging market
The data and reports on commodity trading
advisors (CTAs) and Hedge Funds contained
in this newsletter are based on information
and data obtained from various sources,
including CTA disclosure documents. Neither
BarclayHedge, Ltd., nor any of its affiliates
has verified the accuracy of such information
and data, and therefore cannot guarantee
their accuracy or completeness.
Past performance is not necessarily indica-
tive of future results. An investment in com-
modity futures and options is speculative in
nature and can involve the risk of loss of
one’s entire investment or more. An investor
should carefully evaluate his own financial
position before making such an investment.
Prior to investing with any CTA or Hedge
n (641) 472-3456
debt outstanding is due in the next three
years. A reversal in global monetary pol-
icy will impair the ability to refinance
for many of these issuers. We expect
emerging market defaults to reach as
much as $212 billion, or 25% of the debt
maturing in the next three years.
Investing in emerging markets
defaulted debt is far less predictable
than getting involved in the debt of a
company going through Chapter 11.
Most restructurings occur out-of-court,
which means that creditors don’t get
what they deserve but only what they
negotiate. Understanding of the process
risk – the objectives of the controlling
stakeholders, the nature of the creditors,
legal and other negotiating leverage – is
essential as creditors develop their
recovery strategies. These complexities,
and the need to understand the laws
and business culture across many bor-
ders, discourage most investors from
participating in these markets. As there
is limited competition for debt in the
secondary market, a dedicated investor
with the proper expertise and experi-
ence can invest at extremely attractive
levels and achieve outsized returns. ◊
The organization of this roundtable was
assisted by Jeffrey F. Kuchta, CFA, a
consultant with Strategic Capital
Investment Advisors.
Fund, an investor should independently
investigate such CTA or Hedge Fund. In par-
ticular, an investor should read carefully any
CFTC-required disclosure documents prepared
by the CTA. Any statement of opinion con-
tained herein is subject to change.
Principals and/or employees of
BarclayHedge, Ltd., and/or its affiliates may
from time to time have a position or interest
in the investments referred to in this newslet-
ter. Nothing contained herein should be
construed as a trading recommendation of
BarclayHedge, Ltd. or its affiliates.
The interviews contained herein are the
opinions of the individual authors and do not
constitute the rendering of legal, account-
ing or other professional advice.
n BARCLAY MANAGED FUNDS REPORT