We just celebrated two years of the Distressed Debt 1 LP Hedge Fund!
As one of the top performing Hedge Funds, Distressed Debt 1 LP is managed by Randy Durig, who has published articles online for over two years, and we would like to update our readers on our market perspective and reasons for the hedge fund’s outstanding performance.
Distressed debt is often uncorrelated with traditionally composed portfolios and equity markets, and when actively managed as an asset class, has been a top performing security class as judged by these historical studies:
Distressed Debt as an asset class has historically outperformed the S&P 500 TR Index
Numerous studies have shown that Distressed Debt as an asset class has consistently surpassed the returns of the S&P 500 TR Index (SPY), and has historically outperformed the S&P 500 TR Index by more than 4% per year.What most do not realize is that distressed securities earn higher returns over time, as they can at times be acquired well below their intrinsic values, allowing for much greater reward potential as underlying fundamentals continue to strengthen.
Distressed Debt as an asset class has Low to Negative Correlation with the Equity Markets
Distressed Debt as an asset class is generally considered to be one of the lowest correlated asset classes to the S&P 500 TR Index (SPY).
(Image Source: CAIA Association, Mark J. P. Anson)
Adding non-correlated assets to a highly indexed portfolio can help to provide substantial portfolio diversification. Think of this as not keeping all your eggs in one basket- by having eggs spread across many baskets, the overall impact of a single egg or basket being lost is greatly reduced. Sometimes it is better to have a completely separate and unique approach, which is now seen through increased usage of alternative investment types, such as what Distressed Debt 1LP offers qualified investors.
Active Managers in Distressed Debt historically outperform Index Funds
Historically, active Managers in Distressed Debt Instruments & Funds have exceeded the returns of nearly every index fund by close to 50%, as displayed in the graphic below:
We believe the passive method of stock indexing and/or rule-based indexing is a very successful model, especially in very efficient equity markets, but keep in mind that active investment managers have historically provided far better returns than the indexes in the fixed-income arena and especially in the distressed debt markets. Most people also don’t know that Distressed Debt as an asset class has over time outpaced many of the returns provided through traditional investments.
- Distressed Debt as an asset class has historically outperformed the equity markets
- Distressed Debt as an asset class has Low to Negative Correlation with the Equity Markets
- Active Managers in Distressed Debt historically outperform Index Funds
Evidence of these concepts can be seen through the key return metrics that our highly successful hedge fund, Distressed Debt 1 LP, has generated in only two years:
Compound annual growth rate (CAGR) is another key return metric, and on November 9th, 2017, Hedgeco, a database that tracks the performance of over 9,000 hedge funds ranked us 1st for our CAGR of 47.59%.
The Distressed Debt 1 October 2017 tear sheet (shown below) furthers these three concepts that, historically, 1) Distressed Debt as an asset class provided superior returns over time and 2) have a very low or negative correlation with equity markets, and that 3) active managers in debt markets have historically exceeded the returns of index funds.
Our experience is that this is a very specialized market, and most investors do not understand the many complexities involved in Distressed Securities, especially prior to or during a restructuring event. However, over time these often have been our most successful investments. Industry experience is not easily emulated, and investing in the Distressed Debt market requires a certain level of expertise not usually attained by the average retail investor.
Distressed Debt 1 Hedge Fund
Toll Free: (877) 359-5319
Fax: (971) 732-5121
E-mail us at: Info@Durig.com
For more information or questions concerning Distressed Debt 1 (DD1) please ask here, and we will try to get back to you shortly.