We haven't seen a lot of hedge fund failures--fortunately--but they do happen. Enough so that a few companies are starting services that aim to buy stakes in distressed funds on the cheap. Argo Partners and Liquidity Solutions both made offers to investors in the ill-fated Bayou Group. Neither group seems to have persuaded investors to sellout on the cheap. But the idea is a good one. You have to think that any kind of failure will end up in legal limbo, keeping assets tied up.  When Amaranth collapsed, several investors put their partnership interests up for sale on Hedgebay, a new marketplace for such investments, for 35 cents to the dollar. Distressed stakes trading is considered to be a growth area.

For more:
- here's a Business Week article