The end came quickly for David Barse, who for 24 years had helped lead Third Avenue Management, a mutual fund company founded by legendary investor Marty Whitman known for profiting from beaten-down investments. At its peak in 2006, the firm had managed more than $26 billion.

But in the early afternoon of December 11, Barse was trying to hold the firm together. Walking into a conference room at its midtown Manhattan offices, he presented a rescue plan for the company's high-profile Focused Credit mutual fund. The fund, packed with risky debt, was in freefall and had halted customer withdrawals-a nearly unprecedented step for mutual funds, which are required to promptly return investor money. Now, he wanted to sell the fund's assets to private equity firm Fortress Investment Group.