Hedge Funds Hold Most Junk Debt Since 2020 as Distress Spreads

Hedge funds have boosted their US junk holdings to the highest since the pandemic began, while pension funds scaled back amid growing worry about corporate debt.

“Dollar prices have declined and distressed rates have increased, likely drawing more attention for high yield, specifically from distressed/special situations funds,” Barclays Plc strategists led by Bradley Rogoff wrote in a note Friday.

Hedge funds boosted their high-yield holdings to about 14.5%, from 12.5% last year, data compiled by Barclays show. That’s the highest in almost three years and follows a 26% slump in total junk market value.

Pension fund allocations to high yield ...