Distressed debt investors “generally focus on companies that have fallen on hard times,” says Mercer. Companies range from those on the border of bankruptcy, to those involved in the final stages of reorganisation. There are four distinct styles:

• Generalist managers
  These can in turn be broken down into two camps – conservative and aggressive – and both are typically long-only investors “looking to find good companies with bad capital structures,” says Mercer.
  The conservative camp tends to purchase only in the senior part of a capital structure, taking on bondlike risk, and are “typically early e...