Liquidations to yield asymmetric returns when properly handicapped


Recognizing lowball valuations can lead to large profits.

Vladimir Jelisavcic
(Photo: Bloomberg)

By Vladimir Jelisavcic

In today's environment of uncertain equity valuations and historically low yields on corporate credit, late-stage liquidations present an opportunity to earn solid returns with much less exposure to market risk. Most of the risk of liquidations is process and timing risk. In cases where all assets have been sold, such as MF Global and Nortel, there is no fundamental market risk. Risks are reduced solely to process and timing.

When most investors think of investing in liquidations, they typically focus on just two