According to Preqin, special situations funds have now overtaken distressed debt in AUM for the first time since the Global Financial Crisis. It’s a subtle but important shift — and one we at Zenzic are watching closely.
📊 Why the shift?
🔹 Median IRR of 8% since 2014
🔹 45% of LPs prefer special situations, vs 31% for distressed
🔹 Mezzanine debt AUM has declined since 2006 — but interest is rebounding
As a real estate credit manager, this trend speaks volumes. LPs are clearly seeking more flexible strategies that can invest across cycles and adapt to shifting market dynamics. Traditional distressed models rely on downturns, whereas special situations offer broader, more agile capital solutions.
We see this same appetite in real estate credit. Investors increasingly want managers who can move beyond rigid mandates and deploy capital creatively – from recapitalisations and transitional assets to liquidity solutions in complex capital stacks.
What LPs value today:
✔️ Cross-stack deployment
✔️ Responsiveness to special situations — not just distress
✔️ Flexibility in a fast-moving market
As the lines continue to blur between distressed and special situations, the winners will be those who can think dynamically, act decisively, and unlock value in nuanced, often under-served corners of the market.
If you’re tracking these themes, the full Preqin report is well worth a read. https://lnkd.in/egm52JaY
