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FinancialAdvisor

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FinancialAdvisor

Re: FinancialAdvisor post# 22701

Sunday, 06/24/2007 1:12:53 PM

Sunday, June 24, 2007 1:12:53 PM

Post# of 25966
Two large Bear Stearns hedge funds in peril

Two large Bear Stearns hedge funds in peril
AFP
Published: Wednesday June 20, 2007

Two large hedge funds managed by investment bank and brokerage Bear Stearns reportedly are close to being shut down as their complex mortgage-related bets have soured.

The Wall Street Journal said Wednesday the two funds held over 20 billion dollars of investments just a few weeks ago, mostly tied to risky securities linked to so-called subprime mortgages.

The report said Bear Stearns has been "besieged" by investors and lenders racing to pull their money out of the investment vehicles as the funds' performance has plummeted sharply.

Bear Stearns could not be reached for immediate comment by AFP.

However, the financial group, which traces its Wall Street history to 1923, told investors last Thursday that its profits from mortgage-related trading had moderated significantly.

Bear Stearns said its fixed income revenues declined to 962 million dollars during the second quarter, marking a hefty 21 percent drop compared with revenues of 1.2 billion for the same period of 2006.

It blamed much of the shortfall to a decline in mortgage lending and the "challenging market conditions" facing the housing sector.

Analysts at Lehman Brothers said in a note to investors Wednesday that "the company (Bear Stearns) noted that it expects results to continue to be negatively affected by difficulties in the mortgage market."

The Bear Stearns' hedge funds apparent trading woes are linked to sophisticated securities made up of bonds tied to "subprime mortgages."

Subprime mortgages are home loans offered to Americans with patchy credit histories and are considered more risky than loans granted to people with solid finances.

It is not clear how much of its own money Bearns Stearns has invested in the two hedge funds, which are primarily bankrolled by investors and other lenders, although the Journal said the bank and some of its executives had put 40 million dollars into the funds.

The US market in mortgage-related securities has boomed in recent years, but analysts say unease about the market has spiked in recent months amid a lingering slump in the nation's housing market.

The two funds were identified as the High Grade Structured Credit Strategies Enhanced Leverage Fund and the High Grade Structured Credit Strategies Fund by the Journal.

Hedge funds are essentially private capital pools run for wealthy investors. However, many midde-class Americans are now exposed to such funds as big pension funds have invested in the sector in recent years.


LINK: http://rawstory.com/news/afp/Two_large_Bear_Stearns_hedge_funds__06202007.html


HI-HO SILVER !!!

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