The first half of 2010 will see the peak of restructurings in Europe, according to a significant number of fund managers.

Although a large number of companies restructured during the latter half of 2009, almost half of the respondents to a survey of distressed investors expect the peak of restructurings in the coming months.

As a result a majority of those interviewed for the European Distressed Debt Outlook 2010 expected to increase their exposure to the distressed debt market in 2010. While 61% of fund managers and traders said they would increase exposure, 24% said they would hold steady and just 15% expected to decrease their allocations.

However, only 37% of respondents were actively fund raising for distressed funds. This implies that most funds had enough cash to be invested or would liquidate other assets to increase their distressed allocations.

A majoriy (55%) of funds increased their distressed allocations over the last 12 months. The survey report said this could be due to hedge funds experiencing fund raising problems as well as a reduced proprietary trading appetite within banks.

Almost two thirds (65%) of respondents said an active secondary trading market was a "very important" consideration in distressed investing. A further 15% described secondary trading as "quite important" or "important".

Return targets were fairly modest for the coming year. Around 36% of respondents were targeting returns of between 10%-15% while 26% were seeking returns of between 16%-20%. Both proportions were similar to 2009.

Respondents expected most opportunities for distressed investing to come from the UK, followed by Germany. The property, construction, leisure and media industries were identified as being the most positive sectors for distressed investment.

Senior debt and high yield were the most attractive asset classes for respondents. Over two thirds (38%) of interviewees ranked senior debt as their favourite asset class, compared to 17% for high yield.

The survey was carried out by Debtwire in conjunction with law firm Cadwalader Wickersham & Taft, Rothschild and restructuring specialist FTI Consulting.