[chollida1]

I've got some experience with this, from being in the industry.

Not surprising most of these distressed debt funds are managed by lawyers and bond traders. They started in earnest in the early 80s when "junk" bonds became the latest trading fad.

The traders saw that they could buy up this debt cheap as most banks wanted it off their books and the lawyers figured that they could negotiate better terms than the previous owners would.

These types of funds can provide valuable services in a number of ways: - getting toxic debt off the balance sheet of other firms - creating some liquidity for existing holders - getting the most money possible for existing holders.

The downside is that if you are a target of one or more of these funds you'd better have better negotiators and lawyers than they do :)

Not surprisingly the returns on these types of funds tend to fluctuate a lot causing the industry to move to a few large funds and many small funds. The smaller funds tend to have out sized returns for a couple of years and then blow up spectacularly.