Synapse Shutters Fund After German Bank Pulls Out

Sep 4 2007 | 12:07pm ET

London-based Synapse Investment Management has shuttered one of its three fixed-income hedge funds after its main investor, a troubled German bank, pulled its money out.

While the Synapse High Grade ABS Fund had no direct exposure to the U.S. subprime mortgage market, its chief investor, Landesbank Sachsen Girozentrale, did. The state-owned bank was bailed out to the tune of €17.3 billion (US$23.6 billion) by its fellow state-owned banks, one of which, Landesbank Baden-Würettemberg, has agreed to buy it.

The Wall Street Journal reports that SachsenLB’s decision to withdraw its entire investment in the ABS fund forced Synapse’s hand. The firm blamed “severe illiquidity” for the closure, and said it has already sold some assets.

Synapse now has assets under management in its two remaining funds of about €300 million (US$409 million). At the end of July, the three funds boasted €500 million (US$681 million) in assets.

“We are going to look at starting new funds,” Synapse co-founder Mark Holman told Bloomberg News. “There are enormous opportunities in the ABS market caused by this enormous deleveraging and we intend to return with a fund that can exploit them.”

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