Distressed Securities seeks to invest in companies suffering financial distress. They seek capital appreciation and do not focus on the high-yield nature of the assets. Distressed Securities have two components: high yield (income generating) and in default (capital appreciation). Depending on the nature and intent of the investor, a high yield security can be considered high yield-distressed for one investor and high yield-income generating for another investor. Although the distinction is not clear in all cases, in general, if the investor is investing in CCC rated bonds or below, the securities are considered Distressed Securities. Additionally, debt issued by Emerging Markets can also be considered Distressed Securities.
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