Despite lukewarm expectations of a further rally in oil prices in the near term, hedge funds seem quite bullish on the sector. We mentioned record long bets from speculators on brent and WTI crude futures in a previous post. Bloomberg reports now that a number of hedge funds are acquiring positions in the distressed debt of energy companies.

 

E&P sector’s distressed debt worth investing in

Among those increasing their energy exposure is Mariner Investment Group which has now devoted 10% of its distressed debt portfolio to the sector, up from 5%. Mariner’s Ted Gurion said they anticipate a wave of bankruptcies in small- and mid-cap E&P companies. The fund is looking to invest in exploration and production company bonds where the default is priced in. Another choice of investment for Gurion is the debt of master limited partnerships with a significant asset base. Mariner Investment Group manages $5.9 billion.


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