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 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

Financial Industry Blockchain Consortium R3 To Open-Source Platform Code

Oct 20 2016 | 9:03pm ET

Bitcoin's blockchain technology has spawned a flurry of activity among fintech startups...


U.S. Trust's Beard: The Rapid Growth of the Art Lending Industry

Oct 7 2016 | 10:55pm ET

Alternative investment managers have emerged as some of the most significant art...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...