DISTRESSED INVESTOR: 'It's time to put money to work'

Investors who specialize in distressed investing are getting ready to spend.

"It's obviously an energy and commodities-focused distressed cycle...and it reminds me of the early 2000s tech and telecom bust," Angelo Rufino, portfolio manager of Brookfield Asset Management, said in a panel at the Debtwire investors summit Tuesday.

"We're in the early innings but its time to put money to work," said Rufino, whose firm has $240 billion in assets under management.

A tumble in commodity price spurred panic selling in the high yield market as energy companies missed interest payments on their bonds. Default rates have been climbing at their fastest pace since the financial crisis, according to a study by credit rating agency Standard & Poors.

There have been defaults on $50 billion worth of bonds so far this year, according to S&P. High yield default rates for energy companies have jumped to nearly 20%, while other sectors are seeing a modest uptick to 3.5%, according to a note by Deutsche Bank's Oleg Melentyev and Daniel Sorid.

Howard Marks, the billionaire cofounder of Oaktree Capital Group, thinks the buildup of debt is a "coming attraction." Alternative asset managers like Apollo and Blackstone have said they're ramping up investments in the energy credit area, with expectations of a new distress cycle looming.

"The monetary policy stance made it hard to make the case that this is just another 2011 redux," said Michael Lipsky, partner and portfolio manager at MatlinPatterson's liquid distressed fund.

While some think the risk of a broader recession is fading, some fear that the oil carnage is infectious and can knock down the economy.

"Of the $300 billion of assets in the distressed market, only 55% of bifurcated assets were from energy and commodities sector," Rufino said. "Tentacles of the energy sector flow out further than we thought they would and touched a lot of pieces in the value chain, and that's where we try to make our investments."

Issuers in non-commodity sectors have stumbled. Retailers has the second-highest rate of high yield defaults. Capital good manufacturers are another example.