Distressed debt specialist Marc Lasry said energy debt is still a "phenomenal opportunity" because investors can get "massively overpaid" for the risk they take on.
There are "huge opportunities" in the energy sector especially in restructurings, the Avenue Capital Group CEO said Tuesday in an interview on CNBC's "Halftime Report."
"In a number of restructurings that we were involved in ... we've ended up making somewhere close to sort of 40 percent plus on those names because at the end of the restructurings, you have ended up deleveraging these companies," Lasry said.
The hedge fund billionaire explained that his fund, which had about $11 billion in assets under management as of Sept. 30, is "knocking out the subdebt, the unsecured debt" and buying senior secured debt. Lasry said he thinks investors in these opportunities end up getting "massively overpaid."
Avenue Capital's strategy can generate returns in the energy sector even if oil prices remain flat because of the deleveraging that occurs, Lasry said. He explained that debt purchased at 50 or 60 cents now will be worth "80 cents to par" once the debt has been "taken out."
As for the overall market, Lasry said, "There's nothing great going on, there's nothing bad going on." He said that investors and funds can only outperform in the current environment by picking individual credits or stocks.
"I don't think it's a great environment. There's nothing cheap out there. You're in a zero-rate environment and everybody's expecting you to make sort of 8 to 10 percent," Lasry said. "There's nothing that's forcing you to go 'this is great, I need to do that.'"
He said that outside of the debt in the energy sector, his hedge fund also sees opportunities in Europe where there's still a lot of dislocation and "huge deleveraging," but these are not "things that the average investor can take advantage of."
— CNBC's Patricia Martell contributed to this report.