Distressed-debt funds excited about private credit bargains

In today’s newsletter:

• Distressed-debt funds see their best opportunity since 2008

• Hedge fund Millennium explores shifting Dubai staff to Jersey

• Tracking the Trump pain trade

Distressed-debt funds excited at private credit opportunity

While many in the markets fret daily about the latest surge in oil prices or government bond yields, one group of investors is grinning widely, write Amelia Pollard and Eric Platt. Distressed-debt investors are circling markets waiting to swoop on any assets available at bargain prices.

These funds, which have been largely sidelined over the past decade as markets have surged, typically invest in companies with bad balance sheets but viable underlying businesses, where they can ply their restructuring knowhow to make money.

But as concerns about private credit have spread through financial markets in recent weeks, distressed-debt investors are getting excited at the prospect that the relentless bull market may be running out of steam, potentially leaving a once-in-a-generation opportunity for their craft.

“This is not about a few bad loans,” said Andrew Milgram, founder of Greenwich-based Marblegate Asset Management. “We’re out in the market right now raising a new fund because this is the greatest opportunity I’ve ever seen in my lifetime. I couldn’t imagine God would smile on me like this.”

Private credit has become Wall Street’s primary worry this year, as several semi-liquid funds have faced billions of dollars in redemptions and questions have grown over the industry’s exposure to software companies.

These lenders have extended large sums to private equity firms, which have struggled to sell assets and have become desperate to return cash to investors. More recently, rapid advances in AI have compounded concerns that software companies — another favourite borrower of private lenders — could be rendered obsolete.

Strategic Value Partners, which manages $21bn, specialises in hard assets such as Texas toll roads and Europe’s largest parking garage business. But recently, its founder Victor Khosla directed a small team to study software. “We can’t for the life of us figure out who the losers and winners will be yet,” he said. “It’s too early.”

While he would not say whether he foresaw a recession in the near future, he said the cracks in credit markets were here to stay. “Biggest opportunity since 2008.”

Hedge fund Millennium explores shifting Dubai staff to Jersey

Not just asset prices have become distressed these days. Some employees based in the UAE are having second thoughts about their work environment.

US hedge fund Millennium Management is exploring ways to settle staff who do not want to return to Dubai in Jersey, as some employees seek tax-favourable alternatives amid the war in the Middle East, write Ortenca Aliaj, Costas Mourselas and Josh Spero.

The multi-manager firm, which had more than 100 employees based in Dubai before the war began, is prepared to expand its presence in the Channel Island of Jersey to accommodate people leaving the United Arab Emirates who have requested the move.

Employers have come under pressure to find more permanent solutions for employees who have left Dubai, whose status as a tax haven for expats has been undermined by attacks from Iran. Many expats remain abroad and are at risk of higher tax bills if they cannot return to the UAE. 

Millennium was discussing other destinations in Europe and Asia with staff seeking alternatives to the Middle East, said one person familiar with the matter. The hedge fund has offices in places such as Puerto Rico, Geneva and Singapore but has allowed staff to work from more than 140 locations around the world.

Dubai, the Middle East’s dominant finance and tourism hub, has in recent years become a popular destination for traders hoping to maximise their earnings through its lucrative zero income tax policy. Many flocked there during the pandemic, attracted by how quickly it reopened and its reputation for safety. 

But expats are looking for alternatives to Dubai, at least temporarily, as Iranian drones continue to target the city. Damage from drone debris to a building that includes Millennium staff in Dubai’s International Financial Centre added to fears about safety, said a person with direct knowledge of Millennium’s plans. 

Jersey, which is located off the north coast of France, is a British Crown Dependency but is not part of the UK, so it can offer more favourable taxes than the mainland. The maximum personal tax rate is 20 per cent.

Tracking the Trump ‘pain’ trade

Investors are hunting for the “pain point” that prompts Donald Trump to make policy pivots on his war in Iran as the US president’s social media posts ignite severe swings in the oil market, write George Steer, Emily Herbert, Malcolm Moore and Jonathan Vincent.

Since Trump launched the war in the Middle East, he has tended to intensify his threats against the Iranian regime over weekends, when oil markets are closed, and hint at impending peace when prices are rising.

The messages are part of his administration’s efforts to tamp down petrol price inflation just months ahead of midterm elections when an affordability crisis will be on voters’ agenda.

The pattern underscores the centrality of oil markets to the course of the conflict, along with the White House’s success — at least so far — in preventing crude prices from spiralling out of control.

Investors have grown used to Trump’s capricious policymaking since his toing and froing on tariffs this time last year — when his numerous U-turns spawned the phrase “Trump Always Chickens Out”.

Figuring out when the next “Taco” moment will arrive has become Wall Street’s latest obsession. Deutsche Bank’s head of cross-asset strategy, Maximilian Uleer, this week developed a “pressure index” as a “proxy for upcoming rhetoric or strategic adjustments by the US administration”.

The index factors in the one-month change in Trump’s approval ratings, one-year inflation expectations, the performance of Wall Street’s S&P 500 and US Treasury yields.

“If the index moves up, a probability of strategic adjustment by the US administration is more likely,” Uleer said. “If all four pain points hurt, the incentive to adjust is very high.” The index is currently near its highest level since Trump regained the presidency.

Some investors are simply waiting out the chaos, too worried about being caught offside by Trump’s next post on Truth Social.

“We’re all doing the same thing — nothing,” said the chief investment officer of a North American hedge fund. “You can’t short oil because it could easily rip to $150. Or the war could end in five minutes.”

BlackRock boss Larry Fink thinks AI risks only widening inequality in society. The billionaire head of the world’s largest asset manager argued in his shareholders letter that not enough in society benefit equally from the gains from AI.

Victory Capital has chosen to raise a white flag in its tug of war with Nelson Peltz’s Trian Partners and General Catalyst in attempting to buy UK-based asset manager Janus Henderson. Trian had to lift its bid by $3 per share to $52 over its original offer to win the deal.

London’s upmarket Mayfair district, home to many hedge funds, has a gloomy air these days. As an example, Caxton’s $9bn Macro fund, which is run by chief executive Andrew Law, was down 15 per cent this month to March 20, according to two people who had seen the numbers.

Speaking of overpriced neighbourhoods, UBS told investors last week that it had closed one of its German property funds to redemptions for up to three years.

The UK government wants UK pension funds to invest a minimum amount in private assets and UK companies. Though the House of Lords had objected, and blocked the lower house bill, the government will not give up.

And finally

Moco Museum London has travelled back in time, recreating the New York subway of the 1980s to exhibit 30 of Keith Haring’s chalk drawings of the era. Back then you may have blinked and missed them as he erased some of his works almost as quickly as he created them. His art was fast and meant to be enjoyed by everyone.

Until 18 June 2026