1 August 2007

Australia's Macquarie funds face losses

SYDNEY, Aug 1 (Reuters) - Australia's Macquarie Bank (MBL.AX: Quote, Profile, Research) has warned that retail investors face losses of up to 25 percent in two of its high-yielding investment funds as part of the fall-out from the U.S. subprime mortgage crisis.

Macquarie said in a statement released to the Australian Stock Exchange that the Fortress funds -- which have no direct exposure to U.S. subprime mortgages -- could lose a quarter of their value.

Local media estimated the losses at more than A$300 million ($254 million).

The Australian newspaper said the funds, which are invested in senior secured loans, had combined assets of about A$220 million, but had borrowed borrowed six to seven times their value, magnifying potential losses.

Macquarie Fortress Investments director Peter Lucas also warned the funds faced possible margin calls from their lenders if they could not sell enough assets to reduce leverage, the newspaper said.

Macquarie said the funds' investment manager had no major concerns about the overall credit quality of the funds, but the portfolio had been affected by price volatility in U.S. markets in the wake of the sub-prime mortgage crisis.

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