Marty Fridson, ceo of independent junk research outfit FridsonVision, has launched a new distressed research service in collaboration with distressed advisor Gordian Group. Fridson said the timing of the research service coincides with his expectation the distressed portion of the market is poised to grow. "For the sake of the conventional high-yield investor, I hope I'm on the early side... but by the second half of 2006, we should see a meaningful increase in the default rate," he commented.
With sell-side firms paring their research efforts and providing little if any distressed research, Fridson said there is investor demand for the product. "Brokerage firms look to get paid through transactions... and they take a more proprietary approach in distressed and bankrupt companies," he explained. Even if funds have the best intentions they may not always be able to reward brokers who produce research, he noted. "Rather than have the funds say 'Hey, we loved your research but we did the trade with [Goldman Sachs],' the brokers will [opt not to produce research]," Fridson added.
The research tool will analyze the capital structure of individual names as well as broader credit trends. Fridson noted one topic he intends to tackle is developments in bankruptcy law and its investment implications. He is targeting the product for distressed investors of all kinds as well as high-yield investors who may wind up holding distressed securities.