Distressed securities could be accessed through Hedge Funds or via PE Funds.
It is mentioned that for HF managers, it offers the advantage of being able to take in new capital on a continuing basis. Why would the manager have that advantage if he invests in distressed securities?
Are all of the HF close-ended and the PE funds open-ended?
No its more so the other way around. PE funds usually close up at a certain date - they will say Fund 6 will close on Friday March 24th so you have to get all your subscription docs in before that date.
Hedge funds continue to solicit business on an ongoing basis (now there are some limitations I believe on how many investors can be in the fund depending on the classification; 3c1 vs. 3c7 in the US - but this point is beyond the scope of the exam). Thus if they want to buy more distressed securities and were out of capital they could just find more investors to get more capital.
With PE fund 6 that I mentioned above, down the road if they run out of capital to invest then they don’t open it back up if they wanted to buy more distressed securities. Usually they will just start another fund - fund 7.