In 2020, a record amount of distressed debt flooded into the market to chase illiquid investments. The trend has triggered an imbalance between the supply of distressed debt and available capital for these deals, creating an ultra competitive market for funds interested in these assets. Writing for Preqin, Andrew Amos, director at M&G Investments, explains their particular approach: they are continuing to target distressed debt opportunities while understanding that they may take time to materialize.

Following the Great Financial Crisis, M&G Investments found that corporate stress remains long after the initial economic impact. In fact, M&G Investments was finding opportunities yielding 15% p.a. from corporates six years after the 2008 recession.

Based on that experience, Amos laid out the key ingredients to finding success as a distressed debt fund manager. His top tips include broad and effective market tracking—meaning that fund managers must leverage their network to find all opportunities that don't necessarily hit the mainstream radar; a specialist view from inside the deal that can give a better roadmap of the restructuring; full set of restructuring skills, such as accounting, credit, legal, and the hands-on experience; and a network of industry specialists and experienced board directors to get crucial information on the specialized industry required for operational restructuring.