It seemed like such a no-brainer. This time last year asset managers of every hue were falling over each other to establish debt opportunity funds – the obvious response to the looming liquidity crunch in the credit markets. Indeed, the number of firms setting up funds as early as 2005 showed how clearly they were seen as the next big money-spinner.
Fast forward a year and, along with many other investment strategies across the capital markets, things have not quite panned out as planned. Credit opportunity funds that were poised to pile into the hung LBO pipeline last year were initially frustrated as many banks stubbornly refused to sell and secondary prices remained in the mid-90s. Several big sales in the second quarter of this year – such as Citi’s sale of $12 billion loans to Apollo Management, Blackstone Group and Texas Pacific Group and Deutsche Bank’s $5 billion deal...
