legal
restrictions on holding sub par securities, low coverage by analysts, and lack
of re s e a rch. An active form of this strategy is to buy a substantial pro p o rt i o n
of the outstanding security of the distressed company and then attempt to
influence the re s t ructuring process. The distressed security strategy generally
involves taking long positions, although a hedge fund manager could take
s h o rt positions in distressed securities he thinks will worsen.