Thursday August 02, 2007

Bear Stearns fund value wiped out

rte.ie (backblog) :

US investment bank Bear Stearns has told investors in a hedge fund it manages that the fund's value has been wiped out following losses of billions of dollars from property. The Wall Street firm said in a letter to investors that the fund, the Enhanced Leverage Fund, has 'no value left' while another hedge fund it runs had 'very little value left'. The funds had previously contained a combined $20 billion in investments. Bear Stearns' funds floundered following risky securities investments related to sub-prime mortgages which are granted to Americans with patchy credit histories. Such mortgage loans have been plagued in recent months by late payments and a rising tide of home foreclosures amid a persistent year-long housing market slump.

forbes.com :

As Wall Street's top brokerages scramble to reassure investors they have limited exposure to the growing subprime mortgage crisis, analysts warned that the worst may be yet to come. When Bear Stearns disclosed Tuesday [17 Jul 2007] that two of its flagship hedge funds that invested in the riskiest part of the home loan sector were essentially worthless, red flags went up everywhere.

The move will almost certainly trigger a mass revaluation of portfolios with similar investments, causing big writedowns at the banks, said Richard Bove, an analyst with Punk Ziegel & Co. Bove downgraded virtually all of the Wall Street banks, saying the Bear funds' collapse does not reflect a problem at the firm itself, but rather reveals troubles with the entire system. Investors got a major clue on what the market thinks of these types of assets when Bear Stearns tried to value the funds. The bank found the assets in one fund were essentially worthless and came up with a value of less than 10 cents on the dollar for assets in the other.

See also :

1. Banks losing up to $52 billion over subprime
2. United Capital halts hedge fund refunds
3. $908m Cambridge Place Caliber Fund shuts on subprime loss
4. BIS warns of Great Depression dangers from credit spree
5. How professionals dump their toxic waste on you
6. S&P finally says subprime is mostly junk

(2007-08-02 13:00:21 SGT) [Biz] Permalink

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