Hedge funds prove their agility in loan market

Thu Sep 27, 2007

By Sarah Wood

Even as many hedge fund players continue to profit from their early bets against the subprime mortgage sector, the industry is again demonstrating that its massive growth hasn't robbed it of its speed in exploiting new opportunities. Now, the focus is on a very different credit play: long bets on the hundreds of billions of dollars of leveraged loans and high-yield debt awaiting buyers since the seize-up of the securitized debt markets earlier this year.

You'd have to have been in the deepest wilderness - with no BlackBerry service - since August to not have heard about the special short-term vehicles that are being set up to take advantage of the upwards of $300 billion of buyout-related loans now stranded on bank balance sheets.

The thinking behind these vehicles is simple: There is a one-off chance over the next few months to buy huge amounts of quality assets at...

ISSN: 2151-1845 / CDC10004H

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