Distressed debt skills in short supply

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Although the local economy continues to grow, and company profits make new record highs, increasingly volatile market conditions may result in the need for distressed debt experts in the near future.

Susan Moore, from search firm Jon Michel, says suitable candidates are thin on the ground in Australia. Those people with the required skills have either moved into other areas of finance or headed to Asia, as the Australian distressed debt market has been stagnant over the past decade.

The last general downturn in Australia came in the early 1990s, most evident in the property market. As such, many people currently in the workforce would not have experienced a downturn and therefore would not have the skills to handle distressed debt. To fill the gap, local recruiters will most likely look offshore.

People who have the right skills will be able to command a premium.

Distressed debt is set to be a lucrative area. Distressed debt-focused hedge funds returned an average of about 7.3% in the six months to the end of June, beating average hedge fund industry returns, according to Credit Suisse Tremont.

There is likely to be stiff competition in Australia if the distressed market heats up, and it may not just be from the investment banks. Looking abroad, distressed debt has been a niche area in the investment world, but private equity firms, including Blackstone, Texas Pacific Group, Alchemy Partners, and Fortress, have recently launched distressed debt hedge funds.

Prominent local investment bankers Chris Mackay and Hamish Douglas are leaving their current positions to join the listed investment holding company, New Privateer Holdings Ltd. TheDeal.com reports Mackay, now chairman of New Privateer Holdings, as saying that they expect to create a business with a broad range of interests including distressed debt, private equity, hedge funds and specialist funds.

Some market commentators may say that it is too early to build a distressed debt team. If there is to be a downturn however, a first mover advantage will likely be in play.

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