In special situations investing, volatility and financing stress aren't just challenges to navigate, they're the conditions that can make compelling returns possible. Key Takeaways: A structurally fertile hunting ground: Europe’s mid-market continues to offer a plethora of opportunities, given reduced financing options for these companies and reduced competition among investors. A record-high opportunity set: our special situations team’s watchlist of opportunities was already at a record high, even before the Iran conflict. A compelling portfolio diversifier: our analysis shows that adding a special situations allocation has the potential to improve risk-adjusted returns across various portfolio constructions, driven by historically attractive absolute returns and low correlation to traditional asset classes.