Cheyne Changes Gears On Listed Mortgage Fund

Aug 17 2010 | 1:01pm ET

Cheyne Capital Management today laid out plans to restructure, rebrand and reduce risk in its listed mortgage hedge fund, Queen’s Walk Investment.

Under the proposal, Queen’s Walk, which has been actively selling off the riskier subprime investments that have battered its performance over the past three years and that have it trading at a 35% discount to net asset value, will continue to invest in mortgage-backed securities, but will focus on more liquid and more highly-rated bonds than in the past. It will also change the fund’s name to the less discredited, more conventional Real Estate Credit Investments.

According to Cheyne, the new strategy, which will focus on British and European real-estate debt as opposed the U.S. securities that got it in trouble, currently offers a wide array of attractive opportunities.

“We’re derisking the company and moving up the capital structure,” Shamez Alibhai, the fund’s manager, told Reuters.

The London-based hedge fund’s plans will go to a shareholder vote on Sept. 15. If approved, investors will be given the chance at a one-for-two share placement, an offer designed to raise €26.6 million for the new strategy. Cheyne will also replace much of the fund’s current dividend with seven-year preferred shares paying an 8% coupon.

Since February, Queen’s Walk, which has more than €100 million in assets, has sold off three large legacy assets, the Financial Times reports.

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