A vulture fund is an financial organization that especializes on buying securities in distressed environments, such as high-yield bonds in or near default, or equities that are in or near bankruptcy.
As the name suggests, these funds are metaphorically like circling vultures patiently waiting to pick over the remains of a rapidly weakening debtor.
Vulture funds do not only target companies but also whole countries. In the recent case of Argentina, for example, vulture funds bought up a large part of the public debt at very low prices (sometimes only 20% of their nominal value), and then attempted to cash them when the Argentine economic crisis exploded in 2001. A single vulture fund (Dart Container Corp.) claimed 700 million USD.
Vulture funds have sometimes sued national governments with success, in order to freeze their assets. International courts have at times prevented countries from paying to other debtors because one of these funds had requested an embargo.