Argentina Did Not Invent the Term "Vulture Fund"

April 25, 2016

The NYT had an account of the negotiations that led an agreement where holders of defaulted debt received billions of dollars in payments from the Argentine government. It made a point of contrasting the attitude of the new government, which was elected last fall, with the prior government, which it tells readers had referred to the debt holders as “vultures.”

In fact, this is not pejorative term invented by the prior Argentine government, it is actually the self-definition of these funds. They are called “vulture funds” because they buy up assets that are in default, or expected to be in default, with the expectation that they will be able to get more money than the current market price.

In the case of Argentina, this expectation was based on the (correct) belief that they could use their political power to block efforts to have the I.M.F. and the United States accept the deal under which more than 90 percent of Argentine bondholders settled with the Argentine government. Had this effort been successful, as many in both the I.M.F. and Treasury wanted, then these vulture investors would not have profited from their holdings of Argentine debt.


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