What are the Vulture Funds
Vulture funds are monies destined for the purchase of debts of companies or countries on the edge or in bankruptcy as a capital investment.
Vulture funds are capitals managed by investment companies for the payment of debts of nations or companies in or near default. In this way, the debt is bought at a low cost.
Profits are generated from the moment the debtor's economy recovers and he has to start paying the loan to the owners of the vulture fund. The moment between the purchase and the payment can take years as it happened, for example, in the case of Argentina, which adds up to many months of interest at high percentages.
This type of investment fund is disparagingly called a vulture fund because it resembles the act of birds of prey. Like vultures, they seek out organizations or countries with a dying economy to feed themselves, but unlike birds they do so years later.
It is considered a hedge fund, also called risk capital, since they must risk investing in unstable economies that may or may not generate a return. In this sense, it is speculated on the profit of the purchase.
Vulture funds are associated with countries' external debts, which are large sums of money and with little flexibility in payment. In this way, if a country's economy is bankrupt, it becomes impossible to pay this debt (generating more interest), which affects its international economic credibility, thus reducing its international trade, generating a vicious circle that seems impossible to get out without. the help of the vulture funds.
The vulture funds is a Latin American denomination. In English it is generally translated as holdout or vulture fund.
The practice of vulture funds has been cataloged in a form of modern usury due to the high interest, and therefore profit, above the initial cost.