Hedge Funds Seek Fixes to Credit Default Swaps After Being Stung by Loopholes

• Elliott, Apollo said to be among firms working on market fixes • Effort said to gain steam after controversial Hovnanian deal

A group of powerful hedge funds is banding together to repair the credit-default swaps market after a spate of manufactured defaults has threatened the usefulness of the product.

Elliott Capital Management and Apollo Global Management are among firms working on closing loopholes that have allowed investors to profit from engineering defaults on a company’s debt, according to people with knowledge of the matter. CQS and Anchorage Capital are also part of the group, the people said. Companies’ failures ...