Distressed securities are riskier in the current economic environment, he said. "The most important thing to remember about investing in distressed securities: It's really, really cyclical. That's just a fact of life," he said. "When times are a bit rougher, and there's a lot of volatility, and perhaps the economy is weakening, it's a space where you want to be extremely aggressive even though it looks like the sky is falling."
Aronson co-founded Centerbridge Partners in October 2005, and he has nearly 30 years of experience in credit, distressed strategies and special situations. Prior to founding Centerbridge, he was a partner at Angelo, Gordon & Co., where he led that firm's distressed securities and leveraged loan effort. His firm manages $30 billion.
"So in this type of environment we have to look a bit further-of-field, so for example we have a lot of focus on Europe these days. Europe, while things are improving, there was so much bad debt among financial institutions and the banks, and even though that was a number of years ago, we're still finding opportunities there."
The situational investor also discusses:
- Why today's market is so risky for distressed investors.
- Intrinsic pitfalls in chasing distressed firms.
- Comparisons to the market immediately following the financial crisis.