Troubles in the energy industry have presented opportunities for bond investors thirsting for yields.
Hedge fund manager Jason Mudrick at Mudrick Capital Management has been cashing in, with his fund up about 36 percent in 2016 through August.
"We sift through industries," Mudrick said Tuesday at the 2016 Delivering Alpha Conference presented by CNBC andInstitutional Investor. "We bought a lot of oil and gas credit. We were early."
Being early, though, paid off.
At a time when warnings were going out that the 2015 collapse in energy prices would cause a rash of bond defaults, distressed credit investors like Mudlick stepped in where they saw opportunities.
He said he was buying debt from energy companies at 30 cents on the dollar as companies and investors looked to offload what looked like toxic paper.
"You have this enormous amount of debt held by pro-cyclical hands that will sell when it's going down and buy when it's going up," Boaz Weinstein, chief investment officer at Saba Capital Management, said of the high-yield fixed income climate.
Tony Ressler, co-founder, chairman and CEO of Ares Management, pointed to $500 million in debt and equity financing that Ares completed earlier this year with exploration and production company Clayton Williams Energy. It included a $350 million term loan. "We're not buying the distressed securities but making fresh capital loans on a senior secured basis. It was a 12.5 percent cash coupon … plus warrants, plus subsequently a $150 million equity investment in a business that had wonderful assets but needed a much longer runway," Ressler said.