Tuesday, 29 July 2014
Last updated 9 hours ago
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.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…