On one hand, it’s looking great. Credit Suisse, which withdrew from distressed credit trading in 2008, reinserted itself last month. . And on this same hand, Mark Lasry, CEO of Avenue Capital, a hedge fund specialising in distressed investments, is proclaiming (in the Gathering Storm) that the current distressed cycle will provide the “best opportunity I have seen in over 23 years of investing in this space.”

Lasry postulates various catalysts for the great distressed debt discotheque. They include the $2.5 trillion of debt outstanding from the boom years, the broad base of industries effected by the downturn, and the diminished quantity of willing and able distressed debt investors now that prop desks are out of the picture.

Does this mean there will be much more hiring? Apparently not. Banks’ distressed debt businesses are small. Even if they quadrupled in size, the opportunities wouldn’t be multitudinous.

“There’s a lot of hiring being talked about, but these teams are tiny,” says Lee Thacker, a fixed income search consultant. “You’re looking at four or five people per bank.”

While there will be recruitment therefore, there won’t be much of it. HSBC, Deutsche, Goldman, UBS and BNP Paribas are all seen as candidates for expansion, when expansion means adding one or two people.

Try hedge funds

The distressed scene seems to be more happening in hedge funds.

David Durham, managing director of hedge fund search firm Durham Consultants, says hiring activity here is plentiful, although it tends to overlap with the far larger high yield sector.

“There’s a lot of interest in people to work in distressed and high yield funds,” says Durham. “People want well known portfolio managers with good track records. It’s a very, very active area.”

However, there are signs that things need to get more or less distressed for the asset class to properly kick off. In Goldman’s third quarter call, David Viniar said buyers’ and sellers’ price expectations remain mismatched. At the moment, said Viniar, potential buyers of Goldman’s distressed assets aren’t offering prices that meet its “return hurdle, and so it won’t be something that’s major for us.”