Distressed investing: the rise of Liability Management Exercises

May 23, 2025

Our Special Situations investment team explains how an approach of investing in mid-market European companies due to the strength of legal dynamics, simpler capital structures, and the ability to have influence over restructuring proceedings gives it a competitive advantage.

Key takeaways

  • Within our strategies we actively invest in companies that we classify as ‘distressed’. Our exposure to distressed companies has now hit an all-time high, with over 50% of our flagship offering invested in these companies. This is aligned with data we have seen recently, in which default activity has picked up.
  • Distressed investing entails investing in companies that we believe will need to restructure, either operationally or financially or, in some cases, both.
  • Recently it has become apparent that it is no longer assumed that investors can sit on the sidelines and expect fair treatment. This trend first started in the US with the rise of liability management exercises, and it has now been seen on European shores.