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Stop Debt Vultures!

What are vulture funds?


Vulture silhouetteVulture funds
are usually hedge funds or private equity firms that specialise in buying distressed debt, typically sovereign debt and real estate. Debts are called distressed (or "non-performing" or "toxic") when the debtor is no longer making full loan repayments, or is in danger of doing so. While it may seem counter-intuitive, vulture funds can generate huge profits from these distressed debts, buying them on the secondary market. Selling distressed debt is a logical choice for the original lenders, who wish to minimise losses from their irresponsible lending practices. Within the current financial system, buying distressed debt is a sound business choice for the vulture funds as well, as they can be bought for a fraction of their original value. After obtaining these debts, vulture funds typically take aggressive and drastic action to maximise profits, including repossession of the underlying security (for example, a property, in the case of mortgages), and even pursuing the debtor through the courts. Vulture funds can often make huge profits, as they strike during times of crisis when a borrower or sometimes an entire economy has hit rock bottom. This is where they get their name from: they speculate on the carcass of a company or an economy.

While vulture funds have generally been associated with the Global South in the past, a slew of high-profile cases in Argentina, Puerto Rico, and Ireland, amongst others, has brought them to the fore of the entire global financial justice movement.

What makes vulture funds so bad?

It is important to remember that vulture funds are not lenders. Banks, like other businesses, have a reputation to uphold and deal with clients directly, and are therefore limited in the aggressiveness of their tactics. Vulture funds, on the other hand, have no such requirements, and are free to use any and all means at their disposal to eke the maximum profits from their newly-acquired debts. Furthermore, as vulture funds merely purchase and pursue distressed debt they do not contribute to our society.

The case studies available on the sidebar at the right-hand side of the page highlight the injustice of this practice.


stop the vultures jdc

 

DDCI is taking a number of measures to help put a stop to this harmful practice worldwide. A series of reports commissioned by our organisation (available below) have been published, with the view to inform both public policy, and the general public. Multiple suggestions are given in each reports and outline the changes that must be made in order to ensure a just and fair global financial landscape.

Publication cover - Towards_justice_centred_debt_solutions_2015Click here to download our report "Towards Justice Centred Debt Solutions" by Alan B. Cibils of the Universidad Nacional de General Sarmiento, Buenos Aires

Publication cover - DDCI_Vulture_Funds_ReportClick here to download our report "From Puerto Rico to the Dublin Docklands" by Dr Michael Byrne of UCD