Wednesday, July 11, 2007

Australian hedge fund warns about withdrawals

Looks like some are getting nervous ..... Maybe the times when the Jessica Simpson model of investing was en vogue are coming to an end.....

Die Nervosität nimmt zu.......Es sieht ganz so aus als wenn das von Jeff Saut getaufte "Jessica Simpson model of investing " kommt langsam aber sicher aus der Mode........

Hat tip to Crimson Ghost !

An Australian hedge fund manager with $1bn in structured credits and junk-rated loans warned investors yesterday it could restrict withdrawals to ensure its survival as it reported losses of 14 per cent in one fund in June.

Basis Capital, based in Sydney, said in a letter to investors it had been hit by “indiscriminate” repricing of “otherwise fundamentally sound collateral” amid the crisis in US home loans to less creditworthy investors. It said it had deliberately avoided the worst-hit 2006 subprime loans.

The warning that redemptions can be restricted comes as a series of hedge funds in the US and UK have run into trouble from the collapse in price of illiquid, or hard-to-trade, securities linked to subprime loans.

Restrictions on redemptions are closely monitored by hedge fund investors as an indication of trouble.

Any limit tends to prompt a rush for the exit by other shareholders, forcing a fire-sale of assets to raise cash to meet the pay-outs.

Basis Capital, run by Steve Howell and Stuart Fowler, said the quarterly limits it imposed on redemptions – known as gates – were “designed at inception to ensure the [fund’s] survival through periods of extreme dislocation such as this”.

Rick Bernie, a director, said he expected the gates to be used, although redemption requests had not yet come through. “We’ve always said when the world blows up, if you don’t have a tight enough gate it is like saying, ‘Pick us first’ [to redeem],” he said.

Mr Bernie said structured credits were cheap but Basis was not buying because it had to keep enough liquidity to anticipate redemptions.

> Mmhhhh, when they call the current market cheap it is no wonder that they feel like there is "“indiscriminate” repricing of “otherwise fundamentally sound collateral"....... With this view i think they will face a run for the money from Investors....

> Wenn Sie den aktuellen Kreditmarkt als billig einstufen sollte es kein Wunder sein das Sie vollkommen falsch positioniert sind. Verständlich das alle Investoren Ihre Kohle zurückhaben wollen.....

Basis Yield Alpha fund was down 13.93 per cent in June, only its second monthly loss since it was set up in 2003. Basis Pac-Rim Opportunity fund, with less structured credit exposure, was down 9.2 per cent.

Both funds demand 90 days’ notice for redemptions, which are allowed each quarter, with an extra fee to redeem between those dates.

UPDATE:

Make sure you read the first comment "Alpha fund April news...." !!

Ihr solltet dazu unbedingt noch den ersten Kommentar "Alpha fund April news...." lesen !!

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3 Comments:

Anonymous Anonymous said...

Alpha fund April news....

"Heavily discounted CDO paper has been sourced by
the Fund including A rated securities at a level of
Libor + 700 basis points. These bonds were trading 12
months ago at levels of L+100.
The Fund Manager continues to seek the best
sources of risk-adjusted returns including the use of
innovative features within the CDOs. The Fund has
sponsored the largest European CLO to date and it is
a first for the market in that it has a short bucket to
enable the collateral manager to risk manage the
CLO more effectively than most CLOs allow. This
trade follows on from the long/short ABS CDO that
was sponsored - which, in its use of CDO
technology, was also a market - first transaction .
Investment Firm and is a fully licensed securities
dealer and fund manager.

2:28 AM  
Blogger jmf said...

Thanks!

Excellent find!

"enable the collateral manager to risk manage the
CLO more effectively than most CLOs allow"

lol!

3:17 AM  
Blogger jmf said...


LBO Credit Quality Falls to Lowest in Nine Months



Gates Of Hell / Mish´s take

3:57 AM  

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