Morgan Stanley’s vantage point suggests a chasm between individuals and institutions in when and how they choose to allocate money during the economic crisis caused by the coronavirus pandemic.

As I wrote last month, distressed-debt funds have been sitting on cash for years waiting for the kind of chaos in credit markets during March. Their biggest fear is the best bargains will be gone in a few months. Indeed, Howard Marks, the co-founder of Oaktree Capital Group, wrote a letter this week blasting the Federal Reserve for buying junk-rated bonds under the guise of “moral hazard,” but reading between the lines it boils down to frustration that debt prices won’t tumble further and give his firm a chance to sift through the wreckage.

Who is backing these strategies? It’s hard to know for sure, but it’s well-known that underfunded public pensions have been focusing more on riskier corners of fixed income to juice returns. At the onset of the last recession, some turned specifically to distressed-debt investments. These are huge pools of money whose managers seem to think they can’t afford to wait until there’s an all-clear on the economy to start taking risks.

If Morgan Stanley is right, wealthy individuals will be more patient. That means watching these investors might just be the better indicator of when confidence in the U.S. and global economic outlook has truly taken a turn for the better. People who are well-off financially don’t need to be overly cautious. But they also don’t need to blindly swing for the fences and risk striking out, either.

This article provided by Bloomberg News.

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