What is a vulture background?

The definition vulture funds are funds of venture capital that acquire debt from a troubled economy, close to the bankruptcy, to later press and collect that debt in full, in addition to interest, without attending to possible write-offs or restructuring. Its field of action includes both countries in crisis and companies with significant economic problems.

The objective of vulture funds, also known as distressed funds or holdouts, have the objective of buying assets with the lowest possible price and that at the time of sale, in a short-medium term, they can be sold to other investors to achieve high returns.

What are vulture funds?

An easy explanation of what vulture funds are can be the companies created with the specific purpose of looking for companies or governments in delicate economic situations, which can be bought at very low prices. They consist of very high risk investments, where once the asset is acquired they try to revive it for a later sale.

Unlike other types of fondos de inversión, vultures generally have very high heritages. Although its origin is located in the United States, its true emergence began in Europe in 2007 with the onset of the crisis.

How do vulture funds work?

A vulture fund is concerned with buying companies or bonds of states near bankruptcy, at a much lower percentage than their nominal value. This type of company, once they bought the asset in a delicate situation, have two possibilities. On the one hand, go to international forums to try to collect the value of the bonds in full or to try to refloat the company with the intention of selling it in the future.

Real estate vulture funds are also known, very common in recent years when these companies took over a part of the flats that the banks had in their possession.

These are not long-term operations. The average duration is between two and three years, enough time to check whether the restructuring process of the asset it has been profitable.

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