Australian Hedge Fund, Down 80%, Calls It Quits

Aug 30 2007 | 11:40am ET

Australian hedge fund Basis Capital Fund Management, battered by losses in the U.S. sub-prime mortgage market, is throwing in the towel on its Yield Alpha Fund after reporting losses greatly exceeding previous worst-case estimates.

The Sydney-based hedge fund manager, last year’s Australian Hedge Fund of the Year, has applied for chapter 15 bankruptcy in the U.S. and placed the Yield fund into provisional liquidation. The chapter 15 move—along with restraining orders obtained in the U.S. and Britain—will keep the fund’s creditors from seizing any more of its assets. The once A$320 million fund, which was highly leveraged and heavily invested in collateralized debt obligations, was left with just A$100 million in “assets and liabilities,” according to court filings.

Grant Thornton, hired in July to negotiate with Basis creditors, has been retained as provisional liquidator. The firm said it will report to investors on the fund’s positions in three to four weeks, according to the Australian.

Two weeks ago, Basis sharply downgraded the fund’s prognosis, saying investors could lose more than 80% of their investments. When the firm first faced trouble in the sub-prime markets, it warned that a forced asset sale could cause investors to lose roughly half of their money.

The Yield fund had already been declared in default by such luminaries as Citigroup, Goldman Sachs, JPMorgan, Lehman Brothers, Merrill Lynch and Morgan Stanley.

One fate it may avoid is that suffered by the similarly-situated Bear Stearns: A court fight. Aussie law firm Slater & Gordon is considering a class-action, but is focusing its ire on the financial planners who recommended Basis, as well as the ratings agencies that gave it such high marks, rather than on Basis itself, the Australian reports.


In Depth

Will Liquid Alts’ Performance Sustain Future Asset Flows?

Aug 25 2014 | 10:34am ET

Liquid alternative investment funds saw the highest percentage of capital inflows...

Lifestyle

Och Funds Women In Finance Initiative At U-M

Aug 28 2014 | 3:01pm ET

Och-Ziff Capital founder Daniel Och and his wife have made a "generous donation"...

Guest Contributor

Looking Ahead: What’s In Store For Managed Futures?

Aug 22 2014 | 12:52pm ET

The last five years were phenomenal for investors in equity indices. Will the next...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

July/August 2014 Cover

The time was right

Commodities/Futures magazine launched at the precipice of a revolution in the futures industry—really a revolution in the idea of risk management—that would move it from a small niche industry to ...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.