Vulture fund

Vulture funds (English vulture fund) is a derogatory term for investment funds ( hedge funds) that specialize in problem- laden securities issuers, for example, of insolvent companies or countries to acquire, mostly to large discounts to face value. The term implies, the fund invests not to earn with the operational business of the acquired company money, but in order to earn revenue from its remnants or the sale of assets.

The name alludes to vultures circling patiently to finally benefit from the remains of a weakened victim.

Economic evaluation

Usually, the liquidation value (the value of the items in busting a company) is less than the continuation value (the value of the company in continuation of business ). In these cases, the continuation (at least the healthy part of the company) is the more sensible strategy. Since this and other austerity measures to raise or even restoring competitiveness is a reduction of production capacity and staff usually inevitable, is also the accusation that "locusts " or " vultures " were at work, not uncommon.

In some cases a continuation of the operative business is not economically possible and a liquidation of the company for recovery of the substance alternative in order to invest the proceeds in more promising activities. The decision to liquidate an investment depends also related to the individual entrepreneurial aspect of the owner. If elsewhere higher returns can be achieved in the same or even less time, the temptation is great, comparatively less profitable activities to end by sale or liquidation, rather than risking a renovation with an uncertain outcome.