Readings: Distressed debt, Value investing, FIIs in bond market
- Wall Street Journal: Vulture Investors Won’t Have It Easy
![[Vulture chart]](http://s.wsj.net/public/resources/images/MI-AR794_WVultu_20080808184344.gif)
Prof. Altman estimates that professional investors currently have assembled $350 billion to $400 billion to buy distressed securities. That is nearly double the amount available in 2001 to 2003, and far more than the early 1990s.
- Washington Post: Slow Economy Puts Value Investing to the Test
Last year was an unusually bad one for value investors. Large-cap value funds gained just 1.42 percent, while large-cap growth funds rose 13.35 percent. This year has not been much better, with some of the largest value funds showing double-digit negative year-to-date returns.
Most value investors brush off that concern by saying you will eventually recoup your losses if you are willing to wait. But, said Sorrentino, “I would caution that you could go broke waiting for these investments to turn around. You can be right in the long run and go out of business in the short run.”
Even hard-core value investors acknowledge that some of their peers were too quick to jump on the financials bandwagon, which ended up being a sinking ship because of a spike in foreclosures and a tightening of credit.
- Hindu Business Line: Rising yields bring foreign investors back into debt market
FIIs invested around $897 million in the debt market in July, while in March, April, May and June, their investments have been negative. FIIs’ outflows between March and June were around $928 million.
“While the one-year Mumbai Interbank Forward Rate is 7 to 8 per cent, the yield on a one-year treasury bill is 9.25 to 9.5 per cent and a AAA-rated corporate bond earns a yield of 10 to 10.5 per cent. So there is a substantial arbitrage opportunity of at least 2 percentage points,”
4 key markets that must be open & liquid: equities, debt, currencies & commodities. We are slowly getting there.
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