Distressed: Living up to its name


Battered by volatile markets and the summer's credit crunch, distressed funds finished 2007 with a median gain of just 3.73%, their worst result since 2000, according to Absolute Return.

Coming off a phenomenal 2006, Pat Daugherty's Highland Crusader fund had a turbulent year as swings in volatility led to losses during summer months and again in November. Crusader finished December with a 0.66% gain (versus the Distressed Index's 0.34% fall) to lose 4.05% for the year. Also facing a reversal was KDC Distressed and High Income Securities Fund. After gaining more than 18% in 2006, the fund finished