Market volatility offers fund managers profitable opportunities, which is why there has been more recent interest in forming contingent dislocation funds (CDFs), which are fully committed funds that remain dormant until they are activated by a market stress event. CDFs are not necessarily suitable for all fund managers and investors, however, be it due to the unique features of the vehicle or the types of downsides associated therewith (e.g.
, the cash drag that investors experience). This three-part series explores the unique features, benefits and risks associated with CDFs. This third article notes which investors and fund managers find CDFs appealing, as well as the relatively minimal downsides of the vehicle. The second article
examined unique CDF features (e.g.
, standby dormancy period) that distinguish the vehicle from traditional private funds. The first article
analyzed the fundamental traits of CDFs and trends in the structure’s current and future adoption. See our two-part series on pivoting investment strategies: “Pre‑Considerations to Weigh and Options to Nimbly Amend Existing Vehicles
” (Apr. 6, 2021); and “Creating Vehicles for Short‑Term Opportunities and Laying the Framework for Future Disruptions
” (Apr. 13, 2021).