Distressed Securities funds attempt to benefit from the securities of undervalued companies which are subject to financial distress (i.e. restructuring, liquidation, bankruptcy, etc.).

A typical strategy consists of buying the distressed company’s securities (from the senior secured debt to the ordinary shares) at a discount price, holding them through the whole restructuring process, and selling them after they have appreciated again.

The performances of these funds depends on their ability to assess the probability of success of the different restructuring options, which in turn allows them to identify the securities that may be interesting in the case of an arbitrage strategy and the eventual amount of the investment to be made.

Distressed Securities strategies are generally characterized by a relatively high return and a significant correlation with major bond and/or stock indexes. Consequently, Distressed Securities strategies may be used as “Return Enhancers” in portfolios.

Monthly returns201620172018
January-2.34%1.91%1.77%
February-1.29%0.71%-0.43%
March1.90%-0.84%-0.39%
April2.08%0.51%n.a.
May1.35%-0.48%n.a.
June0.82%0.28%n.a.
July1.92%1.17%n.a.
August2.09%-0.04%n.a.
September0.97%0.58%n.a.
October2.03%0.00%n.a.
November1.15%0.09%n.a.
December1.84%1.66%n.a.
Annual13.15%5.65%0.94%
S&P 50011.96%21.83%-0.76%
Lehman Treasury1.04%2.31%-1.18%
Quarterly returns201620172018
1st Quarter-1.77%1.78%0.94%
2nd Quarter4.31%0.30%n.a.
3rd Quarter5.06%1.72%n.a.
4th Quarter5.11%1.75%n.a.
Annual13.15%5.65%0.94%
S&P 50011.96%21.83%-0.76%
Lehman Treasury1.04%2.31%-1.18%
Risk ProfileEdhec Distressed Securities IndexS&P 500Lehman Treasury
Monthly Std Dev Ann'd5.72%14.37%4.47%
Sharpe Ratio0.830.230.04
Information ratio0.13n.a.n.a.
Min. Monthly Return-7.75%-16.80%-4.39%
Max. Monthly Return5.04%10.93%5.31%
Mean Monthly Return0.70%0.59%0.34%
Median Monthly Return0.91%1.08%0.40%
Exc. Kurtosis3.541.371.49
Skewness-1.10-0.660.01
% of winning Months71.01%65.22%58.94%
Average Winning Return1.49%2.90%1.15%
% of losing Months28.99%34.78%41.06%
Average Losing Return-1.24%-3.75%-0.81%
Correlation AnalysisEdhec Distressed Securities IndexS&P 500Lehman Treasury
S&P 5000.621.00-0.35
S&P 500 Value0.620.97-0.35
S&P 500 Growth0.580.97-0.34
S&P Mid Cap0.670.92-0.35
S&P Small Cap0.620.86-0.36
Lehman Treasury-0.32-0.351.00
Baa-Aaa-0.10-0.070.05
Chg in Baa - Aaa-0.36-0.120.18
10 years - 3 Months-0.02-0.050.11
Chg in 10 years - 3 Months0.02-0.03-0.05
VIX-0.40-0.440.27
Chg in VIX-0.45-0.660.20
in %CSFBHennesseeHFRHF NetBarclayCISDMGreenwichAltvest
2006 Q212.2%12.4%12.7%12.6%12.6%12.4%12.3%12.8%
2006 Q312.0%12.2%12.8%12.6%12.7%12.6%12.3%12.9%
2006 Q412.0%12.2%12.8%12.6%12.7%12.6%12.3%12.8%
2007 Q111.8%12.2%12.8%12.6%12.7%12.7%12.3%12.8%
2007 Q211.8%12.2%12.9%12.7%12.8%12.2%12.4%13.0%
2007 Q312.0%12.1%12.9%12.7%12.9%12.2%12.4%12.9%
2007 Q412.1%12.3%12.9%12.8%12.5%12.1%12.4%12.9%
2008 Q112.4%11.8%12.9%12.8%12.4%12.4%12.4%12.8%
2008 Q212.4%12.0%12.8%12.7%12.5%12.5%12.3%12.8%
2008 Q312.5%11.8%12.9%12.8%12.4%12.5%12.4%12.9%
2008 Q412.7%12.3%13.0%12.9%12.6%12.7%12.7%11.1%
2009 Q112.5%11.9%12.7%12.8%12.5%12.1%12.6%12.7%
2009 Q212.5%11.9%12.7%12.8%12.5%12.1%12.6%12.7%
2009 Q312.5%11.7%12.8%12.9%12.6%12.2%12.5%12.8%
2009 Q412.5%11.7%12.8%12.8%12.6%12.2%12.5%12.7%
2010 Q112.5%11.8%12.8%12.8%12.6%12.2%12.5%12.7%
2010 Q212.6%11.8%12.8%12.8%12.6%12.2%12.5%12.7%
2010 Q312.6%11.7%12.8%12.8%12.7%12.2%12.4%12.7%
2010 Q412.6%11.7%12.8%12.8%12.7%12.2%12.4%12.7%
2011 Q112.7%11.7%12.8%12.8%12.7%12.2%12.3%12.7%
2011 Q212.7%11.6%12.8%12.9%12.7%12.2%12.3%12.7%
2011 Q312.7%11.6%12.8%12.9%12.8%12.3%12.3%12.7%
2011 Q412.7%11.6%12.8%12.8%12.8%12.2%12.3%12.7%
2012 Q112.7%12.2%12.8%12.7%12.8%12.5%11.7%12.6%
2012 Q214.5%14.0%14.5%14.6%14.6%14.3%13.5%n.a.
2012 Q314.5%14.2%14.5%14.5%14.5%14.2%13.6%n.a.
2012 Q414.5%14.2%14.6%14.5%14.6%14.2%13.5%n.a.
2013 Q114.5%14.3%14.6%14.4%14.6%14.3%13.4%n.a.
2013 Q214.4%14.3%14.6%14.4%14.6%14.3%13.5%n.a.
2013 Q314.4%14.2%14.6%14.5%14.6%14.2%13.4%n.a.
2013 Q414.4%14.2%14.6%14.5%14.6%14.2%13.5%n.a.
2014 Q114.4%14.1%14.6%14.4%14.7%14.1%13.6%n.a.
2014 Q214.4%14.1%14.6%14.4%14.7%14.1%13.6%n.a.
2014 Q314.4%14.1%14.7%14.4%14.7%14.1%13.7%n.a.
2014 Q416.3%n.a.17.1%16.9%17.2%16.2%16.4%n.a.
2015 Q116.3%n.a.17.1%16.8%17.1%16.3%16.4%n.a.
2015 Q216.3%n.a.17.2%16.8%17.1%16.2%16.5%n.a.
2015 Q316.3%n.a.17.1%16.8%17.1%16.3%16.5%n.a.
2015 Q416.4%n.a.17.1%16.7%17.0%16.3%16.5%n.a.
2016 Q116.4%n.a.17.1%16.8%17.0%16.1%16.4%n.a.
2016 Q216.4%n.a.17.1%16.9%17.0%16.2%16.4%n.a.
2016 Q316.1%n.a.17.2%16.9%17.1%15.8%16.8%n.a.
2016 Q416.0%n.a.17.3%17.0%17.1%15.9%16.7%n.a.
2017 Q116.3%n.a.17.2%16.9%17.1%15.9%16.6%n.a.
2017 Q216.2%n.a.17.2%16.9%17.1%16.0%16.7%n.a.
2017 Q316.1%n.a.17.3%16.9%17.2%15.8%16.7%n.a.
2017 Q416.2%n.a.17.3%16.9%17.2%15.7%16.7%n.a.
2018 Q116.2%n.a.17.3%16.9%17.2%15.6%16.8%n.a.
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