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.

Events from this Firm
21 Jan 2018, Seminar, Dublin, Ireland

We are delighted to sponsor Airline Economics Growth Frontiers 2018 Conference taking place in the Shelbourne Hotel in Dublin from 21 to 24 January 2018.

23 Jan 2018, Business Breakfast, Dublin, Ireland

We are pleased to sponsor a Dublin Chamber of Commerce breakfast briefing at 8am on Tuesday 23 January at our offices at South Bank House, Barrow Street, with Vanessa Tierney of Abodoo.

In association with
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
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

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