Ireland: Vulture Funds

Coming to terms with the economic necessity of a V-word culture: after all, it's a dirty job - but somebody's got to do it.  Vulture funds and culture capitalists have been getting a bad press for many years now, writes Declan Black. But let's get real and accept the necessity of what it is they do.

Vultures may be ugly birds - but they perform a useful service. They are one of nature's recyclers and help the ecosystem by taking away the dead and unhealthy. It's a dirty job, and one which can be distressing to witness - but it is a job which benefits the environment as a whole.

These birds have lent their names to the label of 'vulture funds', which has since passed into the Irish lexicon as a pejorative term.

The label is used fairly indiscriminately, and in my view often generates a negative emotional context which hinders fair assessment and obscures what is actually happening.

The demonising of so-called vulture funds ignores the fact that one of the key factors in Ireland's recovery from the financial crisis was the willingness of foreign private equity - particularly US private equity - to invest in Ireland.

Much of that investment was in so-called 'distressed assets' - usually meaning either under-performing loans with their associated security, or real estate assets held by entities which did not have the financial wherewithal to fully utilise such assets.

The position in Ireland during the crisis was that the banks had to reduce their balance sheets and address the problem of non-performing loans. To a considerable extent, this remains the position today.

The choices with non-performing loans are few: (1) appoint receivers or otherwise take possession of the secured assets or (2) sell the loans and associated security to third parties.

For an institution which has long-term ambitions to remain and build in a market, option one is both difficult to execute and it carries risk.

Piecemeal repossessions and sales carry high transactional costs. Suing borrowers is expensive and the cash return is usually low. Both activities hurt the reputation of the institution.

A policy of soft deals with some borrowers carries contagion risk for other borrowers, makes future lending riskier (and therefore more expensive for borrowers) and is perceived by compliant borrowers as simply unfair. Therefore, it is not surprising that option two is popular with institutions.

The effect of this market on the Irish economy and Irish society has been broadly beneficial. While in legal terms, the buyers purchased loans and related security, in value terms they usually only wanted and priced the security. This security was usually comprised of commercial or residential real estate.

The emergence of this market was key to the recovery in real estate prices. This, on a corporate level, helped stabilise the financial position of the banks and helped Nama generate returns for the Exchequer.

On a societal level, it reduced negative equity and contributed to positive equity, thereby generating confidence - which in turn leads to consumer spending.

Overall, a positive cycle was created.

For commercial real estate, the removal of such assets from entities which could not exploit or develop them because of their financial situation, and the transfer of such assets to entities which could do so because they have the necessary resources, is clearly good for the economy.

Productive and well-exploited assets create wealth and jobs. Moribund assets don't. And the faster you can shift assets from being moribund to being productive and exploited, the faster the economic benefit comes.

From an economic standpoint, people are key assets too - and again the economy benefits from more people being engaged and productive.

Many commentators have flagged the detrimental economic effect of having so many people burdened by debt which they have little prospect of repaying.

They can become disengaged and demotivated because there is little incentive to work to create wealth when you have to use any wealth that is created to pay off old debt.

The so-called vultures have had a broadly positive effect here too.

Unhindered by a fear of contagion, and not having substantial current and future lending to protect, the funds have proved both quick and willing to do deals with borrowers.

That they generally do this without recourse to the courts is clear from an examination of the court records.

Therefore, not only are physical assets better utilised in the economy because they become owned by a party with resources to exploit them - but individuals and companies have their residual debt obligations reduced to manageable proportions (or waived), and accordingly are themselves in turn better motivated and better able to contribute to the economy.

It is of course true that the observations made above are points of broad application.

They deliberately ignore the individual stories of hardship and failure which feature in every downturn.

This is not because these stories don't matter: far from it. It is because a recovering economy which supports the rapid recycling of assets means we should have fewer such stories and at least the prospect of a happier ending for some.

The problem with individual stories is that we tend to brand the actors as heroes or villains - and these character roles are too easily filled by the archetypal downtrodden small businessman and the faceless vulture fund.

Thematic stories don't have heroes and villains and are complex. But proper analysis should be concerned with broad and thematic effects.

It is only populist and Trump-like analysis which is dominated by simplistic stories of heroes and villains.

So what should this mean in policy terms for our new Government?

First, please do not speak of engendering an entrepreneurial spirit or "celebrating failure" if you are not prepared to accept that entrepreneurial activity - such as investment in distressed assets - also results in immediately visible casualties in terms of business failures and lost jobs.

You must trust that more viable businesses and more sustainable jobs will emerge.

Second, policies which accept business failure as an intrinsic part of a capitalist system but - crucially - which promote the efficient and quick recycling of assets from business failure should generate more wealth, more business and more employment than policies which are aimed at preserving existing businesses and existing jobs.

So please don't jam up the insolvency processes or you will have moribund assets for longer.

Third, don't adopt populist policies based on hard personal histories.

Just as hard cases make bad law, policies which originate from hard personal histories can have very detrimental broad effects.

If we adopted policies which undermined investor appetite, this would be more likely to have an overall regressive effect and perpetuate an environment where hard personal histories will continue and proliferate.

Lastly, this does not mean we should have a capitalist free-for-all. Of course there should be safeguards and a safety net. And of course there should be regulation.

But the regulation needs to be proportionate and it needs to be firmly focused on the overall climate it is intended to create. And that is a climate where even vultures can do their work.

This article was orginally published on on Sunday, 19 June 2016.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions