More Hedge Fund Losses on Subprime

[HenryTo]

Just in case you haven't gotten tired of this already. At some point, a whole bunch of these assets will be dumped on the markets and everyone else will be forced to "mark to market" their CDO holdings and take a loss. Following is courtesy of the WSJ:
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Subprime Woes Push Up
Bonds, Clip Hedge Funds
By ALISTAIR MACDONALD and xxx SHRIVASTAVA
July 21, 2007

Fallout from the turmoil in subprime mortgages caused investors to sell off risky bonds, shun some new junk offerings and drive up Treasury prices Friday. Several hedge funds got caught in the downdraft, reporting losses.

Y2K Finance Inc., a $2 billion London-based hedge fund, said its investments dropped 7.3% in June, according to a letter it sent investors. The fund blamed price drops on its holdings of U.S. subprime assets.

Y2K is part of Wharton Asset Management, a $10 billion-plus London-based real-estate and hedge-fund operator.

Meanwhile, Old Hill Partners Inc., a $700 million Darien, Conn., hedge fund, was down 8.2% this year through May, according to people close to the matter. The firm hasn't yet told its investors about how it fared in June and July.

The hedge-fund troubles follow difficulties in markets for all kinds of risky debt, from subprime mortgages to junk bonds.

Bigger problems have hit funds run by Bear Stearns Cos., which earlier in the past week told investors that two of its hedge funds were basically wiped out by subprime losses. Basis Capital and United Capital are two other hedge funds that have been hit by subprime troubles.

Shares in TRIO Finance Ltd., a London-listed fund managed by Wharton, lost 20% of their value on the week. They closed Friday down 8% in London. TRIO, at its last portfolio update in May, said about 22% of its holdings were in U.S. residential mortgage-backed securities as of March 31.

The £9.02 billion ($18.47 billion) loan financing that will fund the takeover of Alliance Boots by Kohlberg Kravis Roberts & Co. was put on hold until at least the coming week, while underwriters consider revising deal terms to attract interest.

Market participants are also keeping a watch on the loan package being negotiated to help finance Cerberus Capital Management's buyout of DaimlerChrysler's Chrysler unit, which, like the Boots deal, is facing pushback from investors, according to market participants.

Investors seeking a haven funneled funds into Treasurys and the German bund. Treasury yields (which move in the opposite direction from the price of bonds) tumbled. The 10-year Treasury rose 8/32 point, or $2.50 per $1,000 invested, to push down the yield to 4.995%.

Treasurys took their lead from the 10-year German bund, whose yield fell 0.10 percentage point to 4.44%.

--Gregory Zuckerman and Margot Patrick contributed to this article

[HenryTo]

Two more Australian hedge funds have suspended redemptions:

http://www.ft.com/cms/s/f49e6a58-3b1d-11dc-8f9e-0000779fd2ac,dwp_uuid=e8477cc4-c820-11db-b0dc-000b5df10621.html