The prospect of a Donald Trump presidency has thrown financial markets around the world into turmoil. But distressed debt investors are at their most comfortable when the news is negative — and one such investor told FinanceAsia he was sanguine about the next four years.
Trump’s anti-free trade stance will likely cause increasing volatility in asset prices, giving funds more chance of snapping up the debt of troubled companies as cheaply as possible, said seasoned investor Rajath Shourie at Los Angeles-headquartered Oaktree Capital Management.
“There is more chance of some interesting dislocations that people don’t expect, which tend to create opportunities in distress,” Shourie, the global co-portfolio manager within Oaktree's distressed debt group, told FinanceAsia.
But Shourie was still hedging his bets, given Trump’s unpredictable nature.
“People are just less certain about what Trump really stands for," he said. "You know one thing: he is anti-free trade, and that’s negative for markets, but there are other things that are theoretically business friendly. He’s probably a tax cutter, he probably believes in less regulation.”
That is not to say Oaktree predicted Trump would win. In fact, the firm was looking at potential bankruptcies in the US drug sector if Hillary Clinton had taken the reins of government.
“Clinton has been particularly vocal about the fact that some pharmaceutical companies are gauging and that they need to bring down prices, and if they do they will find themselves in a decent amount of trouble ... We’ve been dedicating some resource to that.”
Oaktree has been gradually ramping up its presence in Asia. It opened an office in Sydney led by Byron Beath earlier this year. The move follows Australia’s mining boom collapse in the face of falling commodity prices and rising costs.
“For us in distress there hasn’t been a huge amount of opportunity in Asia, but it is starting to come back our way a little bit,” said Shourie, at Oaktree’s offices in Hong Kong. He was speaking from the same building he worked in as an associate at Goldman Sachs in the summer of 1999, when he picked off distressed debt investment opportunities in Korea, Thailand and Indonesia.
However, he mulled: “The distressed opportunities are more significant for us in Europe and the US.”