What characterizes a distressed strategy in investing?

A distressed strategy in investing is characterized by targeting investments in companies that are experiencing financial distress or are on the verge of bankruptcy. This often involves purchasing both the debt and equity of such companies. The rationale behind this strategy is that these securities are typically undervalued due to the issuer’s financial difficulties. Investors believe that if the company can successfully restructure or turnaround, it presents opportunities for significant gains when the market recognizes its true value.

These investments can be particularly high-risk but potentially offer high rewards if the company's situation improves. By acquiring both debt and equity, an investor can benefit from different aspects of the company’s capital structure, allowing them a more comprehensive approach to risk and return in the distressed company’s recovery process.

In contrast, the other options describe investment strategies that do not align with the characteristics of distressed investing. Focusing solely on high-growth companies would entail looking for strong performance potential without regard to financial troubles. Investing exclusively in foreign markets narrows the focus to geography rather than financial condition. Lastly, a focus on commodities trading does not pertain to corporate securities or their financial health, and therefore does not align with a distressed strategy.