If you work in default management, it’s time to cozy up to the idea that you may be answering to new boss sooner rather than later — as we’ve reported in the past, hedge funds are lining up on both sides of the mortgage market to snap up distressed mortgages or the securities backed by them. The latest is ARE Asset Management, a Miami-based real estate company that has launched the ARE Fixed-Income Fund and the ARE Opportunity Fund with $100 million each, according to a story published Friday by hedge fund trade publication FINalternatives. The Opportunity Fund will purchase non-performing residential mortgages at a discount and manage those loans to recovery or foreclosure, the publication reported. And they’re certainly not alone, not in a universe where such heavy hitters as BlackRock and Highland Capital have already committed $2 billion to buying up distressed mortgages in bulk as well. From the story, a look at why the firm’s managing principal thinks smaller may end up being better on the whole loan side:

“We see the bottom coming and we think it’s appropriate to get into this market before we do hit bottom,” Jeffrey Kirsch, managing principal, said. “We have turned bullish and don’t want to wait any longer for the opportunity. We can be very selective right down to the zip code where we buy, and we believe the government is doing everything in their power to turn the mortgage industry around.” Kirsch said the firm, which has bought and sold more than $1 billion in first-mortgage residential loans during the last several years, has a distinct advantage over its hedge fund peers in that it owns its own loan processing unit. “While hedge funds may have a lot of money and the ambition to enter this market through whole loans, I often question their ability to have these loans serviced,” he said. “It’s difficult to be in this business today without having a servicer, and most of the large servicers are owned by Wall Street companies and don’t have a lot of excess capacity on the non-performing residential side.”

It’s my sense that many front-liners in the default space don’t yet see this change coming — they’re too busy keeping up with the workload that’s in front of them. But it may be time for senior executives in the default management industry to start looking at where the money’s headed; with the sort of dollars now sitting on the sidelines and waiting to jump in, the landscape for default servicing will likely change dramatically in the months ahead.