Monday, 20 October 2014
Last updated 1 hour ago
Jul 20 2007 | 8:21am ET
It’s about as far from Bear Stearns’ Madison Avenue headquarters as you can get, but the sub-prime market has struck again, this time Down Under.
Australia’s Basis Capital has failed to meet margin calls, leading some lenders to declare its Basis Yield Alpha Fund in default, research firm Zenith Investment Partners said yesterday, citing a note Basis sent to investors on Wednesday. In a Bear parallel, some of those lenders are apparently moving to seize the fund’s assets.
According to Zenith, Basis—just one year removed from being named Australian hedge fund of the year—has told investors that if its assets are seized and sold at “distressed sale prices,” the fund’s net asset value could be halved. The fund was down about 14% last month, MarketWatch reports.
Zenith said Basis, like Bear before it, is negotiating with its lenders and has hired accounting firm Grant Thornton to assist with an orderly sale of assets.
“This latest information is obviously very concerning, as the effect of the default with its financiers’ results in Basis losing control of the timing and potential sale price of securities in the portfolio,” Zenith wrote in its report. “There is no way to determine the likely action of the financiers and the prices they may achieve for the sale of securities in the portfolio. This could lead to significant losses to investors in the Yield Fund.”
Basis pointed the finger elsewhere for its troubles, arguing that its “otherwise fundamentally sound collateral” had been adversely affected by brokers “indiscriminate pricing” of assets.
“This indiscriminate pricing is largely the result of a market-wide lack of liquidity, which has resulted in very little collateral actually being traded,” Basis wrote in its mea culpa to investors.
Sep 22 2014 | 4:15pm ET
"I tell people that everybody likes good news and so if you have good performance that’s wonderful,” explains Mike McKitish of Peddie School's endowment, “but it’s the people that want to talk about the bad news or where they drifted and how they came back and how they stayed to their discipline…” that he wants to hear from. Read more…
Sep 30 2014 | 9:29am ET
The crisp Autumnal days of October are upon us, and so are a few of the hedge fund industry’s favorite charitable events. If you have never been to Rocktoberfest, well, you are missing out. And for a quieter evening of sipping and socializing, stop by HFC’s Wine Soiree. Read more…
Most traders agree that proper risk management is the key to successful trading. However, many traders depend on the deeply flawed measure of standard deviation as a benchmark of risk. Here we put it ...