Few investors hope for a sharp downturn in global markets, but distressed debt fund managers have been doing just that for the past two years. So far, their prayers have gone unheeded as central banks’ generous monetary policies have kept the bull market alive, leaving distressed funds with a lot of cash and few places to invest it. Unless there is a dramatic collapse in markets and economies this year, the boom in these types of funds will halt.

In Europe, private credit firms have raised nearly €20bn for 13 distressed funds...