Inside Active by Bloomberg Intelligence CrossingBridge’s Sherman on Return of Capital
Mar 17, 2026
David Sherman, founder and CIO of CrossingBridge Advisors and manager of the RiverPark Strategic Income Fund, is a value-oriented credit investor. He explains why protecting return of capital comes before chasing yields. He applies bottom-up, cash-flow focused credit analysis. He highlights opportunities in Nordic bonds, warns about liquidity premiums and a K-shaped credit backdrop. He outlines short-duration and opportunistic positioning.
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Liquidity And Fund Flows Drive Crisis Vulnerability
- Asset-liability mismatch and fund flows determine resilience in deteriorating markets; growing funds fare better during price discovery.
- Daily-liquidity funds like Sherman’s face inherent mismatch lending long to borrowers while offering daily redemptions to investors.
How Distressed Investing Has Changed Since The 80s
- The distressed market today differs from the 1980s due to new buyers and liability management exercises that dilute cleanup opportunities.
- Sherman prefers buying top-of-capital-structure post-LME paper with good covenants to provide liquidity and earn returns.
K-Shaped Credit Fundamentals
- Corporate credit fundamentals show a K-shaped divergence: plain-vanilla high-yield can be higher quality than direct lending or BDC loan pools.
- Scarcity of high-yield bond issuance versus leveraged loans shifts where risks and returns concentrate across structures.