13 July 2007

Australian hedge fund warns about withdrawals

The resets are just starting and detailed information about Basis Capital's positions would be interesting to look at. Basis report that they avoided 2006 vintage loans but it's likely that 2005 isn't far behind. Anyway this report in from the Financial Times.

FT.com / Capital markets - Australian hedge fund warns about withdrawals: "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."

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