GLOBAL - Pension funds should look out for distressed debt opportunities amongst credit crunch victims, claim industry experts.
Research from Prequin, which conducts studies on private equity and distressed debt, found distressed debt and special situation funds had on average outperformed private equity funds since 1999.
However, the Prequin report warned of large variances in performance between the most and least successful individual managers.
Larry Jones, CIO, Nedgroup Investments, a fund of hedge funds, said: "There will be more opportunities in the distressed debt sector following the recent crunch and these may come at a cheaper rate as companies realise they cannot afford to finance themselves."
Another industry source, who did not want to be named, commented that some badly hit sectors would become good value stock targets as tightened credit standards would rule out many refinancing options.
Pension funds were shown to be major investors in distressed debt, with the Californian Public Employees' Retirement System (CalPERS) and Australia Post Super-annuation Scheme named in the Prequin study.
Jerome Booth, head of research at Ashmore Investment Management, said distressed debt also remained a good investment option in emerging markets.
Canada Life has signed a £351m bulk annuity contract insuring the pensioner liabilities of 2,510 members and dependents in the AA UK Pension Scheme.
In this week's Pensions Buzz, we want to know if you believe there is ever a case for combining retirement savings products with other savings products, and if the PPF levy for sponsorless schemes is appropriate for DB consolidators.
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