A vulture fund can broadly be defined as an entity that buys
securities in distressed investments, such as high-yield bonds or
loans in or near default.
The activities of vulture funds operating in Africa has
attracted a great deal of publicity. In 2002, former British Prime
Minister Gordon Brown (then Chancellor of the Exchequer) told the
United Nations that it was "morally outrageous and
perverse" that vulture funds made vast profits by buying up
the debts of poor countries cheaply and then sued for ten or a
hundred times what they paid for them.
Recent successes for vulture funds have added to the pressure to
act on the issue. The case of Donegal International against the
Republic of Zambia in 2007 focused these concerns. Donegal bought
an old Zambian debt from the 1970s for $3 million and sued for $55
million in the British courts. Donegal was ultimately awarded $15
million.
