Roston also fails to note that while the profits in vulture investing can be enormous when it works, the losses can be even bigger when it doesn’t work. What he describes as “the vultures’ biggest play of all”—Argentina—has been an unmitigated disaster for the vultures, who are happily racking up legal fees and court judgments in New York, none of which make them any money at all, even as the bondholders who accepted Argentina’s exchange offer have seen their new bonds soar in value. At this point, it’s pretty much unthinkable that the holdout vultures will ever end up making more money off Argentina than they would have done if they’d just accepted Argentina’s initial offer. And to date, of course, they’ve received nothing. More generally, the total profits of all vulture funds ever remain a rounding error in the history of sovereign debt flows—it’s important to keep these things in perspective, and to remember that profits in some countries have to be offset by losses in other countries which never paid out.
Roston’s conclusion—that vultures will be with us always—is less hopeful than my view that a consensus is forming between people who used to be very far apart, and that the vulture-fund debate is slowly fading into irrelevance and anachronism. Certainly the Argentine elephant is going to remain in the room for the foreseeable future—and now, of course, there’s a very real risk that we’ll see the whole thing kicked up a few orders of magnitude if eurozone sovereigns get into the sovereign-default game. But for the time being the European Central Bank is doing a great job of keeping distressed sovereign debt out of the hands of potential litigants.
One vulture investor recently moaned to me that there was nothing to invest in, these days, what with all asset prices going through the roof. Maybe the thing which really kills vultures isn’t legislation from the likes of Maxine Waters, but rather ultra-loose monetary policy and quantitative easing. Vultures profit from distress; they tend to drown, rather, in liquidity.