One of Asia’s oldest hedge funds warns of looming ‘distressed cycle.’

August 14, 2019 | Hedge Funds
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The US-China trade war and growth concerns are likely to push up debt defaults in the region

As default rates in China tick up, a distressed cycle is looming on the horizon, according to George Long, Chief Investment Officer of LIM Advisors, a 14-year-old hedge fund based out of Hong Kong that manages $1 billion in assets.

Chinese debt souring

The trade wars have taken a toll on the Chinese economy, and a rising number of firms have thrown up their hands on their debt obligations. In July, China’s onshore bond defaults touched a four-month high. According to Long, some sectors could even suffer big shocks due to the trade war, further raising the risk of large scale defaults.

Long’s Strategy

The fund prefers to invest in private debt to smaller firms that have been ditched by a risk-averse banking system.

Another avenue is to invest in special situations in the high-yield bond market.

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