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Vulture Fund

A vulture fund is a type of investment fund that specializes in buying distressed assets, such as the debt or equity of companies facing financial difficulties or bankruptcy, often at a steep discount. The fund aims to profit by either restructuring the company and selling it at a higher value or by forcing the company to repay its debt. Vulture funds are controversial because they often target vulnerable companies or countries in financial distress, seeking to maximize returns regardless of the impact on stakeholders.

Example

A vulture fund buys the debt of a struggling airline at 30% of its face value and later forces the company into a restructuring plan, profiting when the airline repays the debt at a higher value.

Key points

• An investment fund that buys distressed assets at a discount, aiming to profit from their recovery or liquidation.

• Often targets companies or countries in financial distress.

• Controversial due to the aggressive tactics used to maximize returns, sometimes at the expense of stakeholders.

Quick Answers to Curious Questions

They are often seen as taking advantage of financially distressed companies or countries, using aggressive tactics to maximize profits at the expense of other stakeholders.

They focus on distressed assets, including the debt or equity of companies facing bankruptcy or financial difficulties.

They buy assets at a steep discount and either restructure the company to increase its value or force repayment at a higher value, profiting from the recovery.