Credit hedge funds and proprietary trading desks are starting to encroach on the trades once reserved for the distressed, equity long/short and merger arbitrage funds. US airline companies have been in trouble for several years now, most recently because of the overwhelming costs of their defined-benefit pension plans. This year, for the first time, credit-specialist hedge funds have been taking a variety of trading positions as a result. Even before the pension problems, credit hedge funds were taking various positions on airlines this year, such as putting on long/short trades on an airline’s secured and unsecured paper.
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