Question

Which of the following statement/s are true about the 'Vulture Funds'?

1. Vulture funds specialize in purchasing distressed debt from companies
2. Vulture funds often take a high-risk, high-reward approach to investing
3. They often target entities that are undergoing financial difficulties, such as companies facing bankruptcy.

• A. All of these
• B. 2 only
• C. 2, 3
• D. 3 only

Answer 1

Answer:

A. All of these

Vulture funds

• Also known as distressed-debt funds, specialize in purchasing distressed debt from companies or governments at a significant discount to its face value.
• These funds target debt that is undervalued or in default, aiming to profit by buying distressed assets at a deep discount and attempting to recover as much of the debt as possible.
• Vulture funds often take a high-risk, high-reward approach to investing, utilizing aggressive debt collection strategies, restructuring deals, or litigation to maximize their returns.
• They focus on distressed entities facing financial difficulties, such as companies on the brink of bankruptcy or countries experiencing financial crises and struggling to repay their debts.
• The aggressive tactics of vulture funds have sparked ethical and legal concerns, with criticisms revolving around their potential to exacerbate financial crises, prolong legal disputes, and hinder the recovery of debtor entities.