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Hedge Funds Turn to Raves, Madoff Claims on Distress Scarcity

Hedge funds investing in distressed securities should be finding little to feast on with U.S. company defaults at a six-year low. They’re still trouncing most peers within the $2.7 trillion industry.

Distressed funds have climbed 7 percent this year, compared with 2.5 percent for managers across strategies, according to data compiled by Bloomberg. Firms including Paulson & Co., Mudrick Capital Management LP and Maglan Capital LP have approached or exceeded returns of 10 percent.