Fund managers are rushing to raise European distressed-debt funds as the value of non-performing bank loans in Europe and the amount of capital devoted to the distressed sector in the region reach record highs.

By the end of October, non-performing loans in Europe held by banks had reached €1.2 trillion, up by nearly €100 billion on the same period last year, according to data from PricewaterhouseCoopers. The uptick was largely driven by increases in Italy, Greece, Spain and Ireland, the accountancy firm said.