With an MBS market painfully parched from a lack of liquidity, and expected to stay that way well into next year, several large, well-known asset management firms and smaller alternative investment shops are planning to launch distressed-debt funds.

Pacific Investment Management Co., known as Pimco, is planning to launch a $2 billion distressed-debt fund to invest in troubled mortgage-backed securities, according to reports in The Wall Street Journal. The Pimco Distressed Mortgage Fund will invest in ABS, MBS and CDOs, the newspaper reported. Trust Company of the West is said to be launching a similar fund.

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