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Platinum turns to distressed securities

The Platinum Turnberry fund is a hedge fund from Platinum Capital Management that invests in distressed US corporate debt.

The fund invests in distressed securities through a US based hedge fund called the Turnberry master fund. This in turn invests in the distressed debt of large US companies across a range of industrial sectors. It will look for companies that have issued bonds but which are in trouble &#45 although this does not necessarily mean companies facing bankruptcy.

When a company is in financial distress its bonds and shares can be bought cheaply. The Turnberry fund will buy bonds and other securities cheaply to sell at a higher price when that company recovers. Although it is a long-only fund, there may be cases where the fund manager wants to short the stock of a company to exploit price differences between assets.

Platinum has been looking to add a distressed securities fund to its range for a long time but finally settled on Turnberry after a year of due diligence. Craig Reeves, managing director of Platinum, says the Turnberry fund is very liquid compared to some funds they were considering and its independent monthly valuations worked in its favour.

Although distressed securities may provide investment opportunities as the US economy improves, this is a specialist area that may suit investors who already have experience of hedge funds. Thames River Capital has a hedge fund of funds that invests in debt securities and some investors may see this a less risky than the Platinum fund because the returns are not dependent on a single fund.


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