As an investor, it’s essential to have a good feel for when risks will and won’t pay off in the long run. Some investors follow the “slow and steady” model, preferring to avoid taking big risks. This helps them keep from losing big; but it can also keep them from winning big, too. On the other hand, some investors prefer to take a riskier approach, betting on stocks and companies that haven’t done so well in the past—but that they see potential in.
In the past year, it’s those investors who got the best returns. Those investors, known commonly as distressed investors, saw their risks turn largely into regards, with returns up more than 13.28 percent through November of 2013.
According to Charles Stucke, CIO for the Guggenheim Investment Advisors, defaulted bonds performed the best in 2013. “Post re-org equities have done really well, and it’s precisely the distressed investments owned in these situations which drove truly exceptional performance at some of the most clever credit managers.”
Activist investors like Dan Loeb of Third Point, Barry Rosenstein of JANA Partners, and Nelson Peltz of Trian Fund Management also saw great gains this year. These investors push for changes at companies they have a large stake in, hoping to make said companies more efficient and profitable. These activities have helped boost Third Point by 22.4 percent, JANA Nirvana Fund by 25.64 percent, and Trian Fund Management by 35.92 percent.
“We have seen an increase in corporate events that provide event driven equity managers hard catalysts to drive value creation and profitable investment opportunities,” said Troy Gayeski, a partner and senior portfolio manager at SkyBridge Capital. “We believe that these drivers will continue to be abundant in 2014, which is why event driven equity funds remain our largest thematic exposure for the next 6 to 12 months.”