Another Bear Stearns Hedge Fund In Trouble

Aug 1 2007 | 7:47am ET

The debacle that is the sub-prime mortgage market has been bad news for many, but none have it quite as bad as Bear Stearns.

Bear, already reeling from the collapse of two highly-levered hedge funds with big exposure to sub-prime mortgages, suspended redemptions from a third fund after an avalanche of investor requests poured in. The New York investment bank called the move a necessary step to preserve the Asset-Backed Securities Fund’s value.

“We don’t believe it’s prudent or in the interests of our investors to sell assets in this current environment,” Bear spokesman Russell Sherman told Bloomberg News. “The fund portfolio is well positioned to wait out the market uncertainty.”

According to Bear, the $900 million fund has less than 0.5% of its portfolio in assets linked to sub-prime loans, and has $50 million in cash on hand to meet margin calls, with roughly $13 million in principal and interest coming in each month. Thus, unlike its unfortunate brethren, the Asset-Backed fund seems to be in no danger of outright failure, though TheStreet.com reports that observers say the fund is on the brink.

Last week, reports on Boston-based Sowood Capital Management’s sub-prime woes noted the fund was in no danger of closing. However, Sowood’s manager told investors on Monday that its funds would be liquidating after losing more than half their value.

The third Bear fund, up more than 5% through May, fell in July, though Bear would not say by how much.


In Depth

Q&A: Star Mountain's Brett Hickey On Investing In 'The Growth Engine Of America'

Sep 22 2017 | 5:06pm ET

Lower middle-market companies form the economic fabric of the nation, but they can...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Don’t Overlook These 6 Hybrid Cloud Concerns

Sep 14 2017 | 6:27pm ET

Cloud-based technology solutions have made tremendous inroads into the alternative...