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Most Hedge Funds Suck, and that's Bad News for the Industry and Investors
CNBC is reporting that Cantor Fitzgerald has circulated a bid list for $400 million in debt securities from the Leverage Fund, and some bids are 10 cents on the dollar."
Re: Most Hedge Funds Suck, and that's Bad News for the Industry and Investors
Brian Pretti in his excellent letter contraryinvestor.com wrote yesterday about how he senses panic buying of US equities amongst hedgies who are showing, in the main, below index returns over the past few years. The managers see real estate cratering, interest rates rising and every other issue, but the market keeps going up (if you exclude the past week or two) and they have been buying regardless, jumping in, he says, after "capitulating", and they will be even more eager to hit the sell button the moment anything turns south. FWIW.
Re: Most Hedge Funds Suck, and that's Bad News for the Industry and Investors
And while we're on the subject...just how big a deal is this:
"Standard & Poor's Ratings Services today took various rating actions on 133 subordinate classes from 62 different transactions from 23 different issuers. We downgraded 45 classes backed by closed-end second-lien collateral. ... The downgrades and CreditWatch placements reflect early signs of poor performance of the collateral backing these transactions."
And while we're on the subject...just how big a deal is this:
"Standard & Poor's Ratings Services today took various rating actions on 133 subordinate classes from 62 different transactions from 23 different issuers. We downgraded 45 classes backed by closed-end second-lien collateral. ... The downgrades and CreditWatch placements reflect early signs of poor performance of the collateral backing these transactions."
Aw, yeah! Music to my ears, ahem, eye candy in this case.
Re: Most Hedge Funds Suck, and that's Bad News for the Industry and Investors
Five cents on the dollar! From today's FT:
"Buyers avoid Bear Stearns’ cut-priced sale
By James Mackintosh and Gillian Tett in London
Published: July 3 2007 21:46 | Last updated: July 3 2007 21:46
Investors in the worse-hit of two stricken Bear Stearns hedge funds are offering to sell their holdings for as little as 11 cents on the dollar but still finding no buyers, according to unfilled trades on Hedgebay, a secondary market for funds.
Vulture funds and others have been quick to bid for holdings in the two funds, but the best bid for Bear Stearns High-Grade Structured Credit Strategies Enhanced Leveraged Fund, the more geared of the two, is just 5 cents on the dollar.
Private sales of stakes are the only way investors can exit the two Bear funds, after the bank suspended redemptions in May amid a wave of withdrawals.
“There are buyers but they can’t agree on price,” said Jared Herman, co-founder of Bahamas-based Hedgebay.
The less-geared Bear Stearns High-Grade Structured Credit Strategies Fund, which the bank has rescued with a $1.6bn loan, is being offered at about 70 cents on the dollar. The fund is only attracting bidders at about 30 cents, according to people who use the system."
Published: July 3 2007 21:46 | Last updated: July 3 2007 21:46
Investors in the worse-hit of two stricken Bear Stearns hedge funds are offering to sell their holdings for as little as 11 cents on the dollar but still finding no buyers, according to unfilled trades on Hedgebay, a secondary market for funds.
Vulture funds and others have been quick to bid for holdings in the two funds, but the best bid for Bear Stearns High-Grade Structured Credit Strategies Enhanced Leveraged Fund, the more geared of the two, is just 5 cents on the dollar.
Private sales of stakes are the only way investors can exit the two Bear funds, after the bank suspended redemptions in May amid a wave of withdrawals.
“There are buyers but they can’t agree on price,” said Jared Herman, co-founder of Bahamas-based Hedgebay.
The less-geared Bear Stearns High-Grade Structured Credit Strategies Fund, which the bank has rescued with a $1.6bn loan, is being offered at about 70 cents on the dollar. The fund is only attracting bidders at about 30 cents, according to people who use the system."
Who are these "people who use the system"? We have conducted several interviews of fund managers. 70 percent? 30 percent? No. There are no bids. None. As of yet, there is no price.
Re: Most Hedge Funds Suck, and that's Bad News for the Industry and Investors
"The assets in Bear's more levered fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, are worth virtually nothing, according to people familiar with the matter. The assets in the other larger, less-levered fund are worth roughly 9% of the value since the end of April, these people said. The April valuations weren't immediately available but in March, before their sharp losses, the enhanced leverage fund had $638 million in investor money, while the other fund had $925 million.
The two funds have been in the spotlight for weeks after suffering heavy losses in the subprime market. Late last month, Bear helped stabilize the less-levered fund with a $1.6 billion secured loan; the enhanced fund began trying to unwind its remaining $1.1 billion in debt. "
One cent bid
The reported 91% loss suffered by Bear's larger High-Grade Structured Credit Fund may be bigger than some investors were expecting, judging by recent activity on Hedgebay, a secondary market for hedge fund stakes.
A few weeks ago, activity on the Hedgebay market suggested investors were willing to sell their stakes in the High-Grade Structured Credit Fund for roughly 50 cents on the dollar, according to a person familiar with the market.
That dropped to 20 cents on the dollar more recently.
Late Tuesday, one investor was bidding one cent on the dollar to exit their position in the High-Grade Structured Credit Fund, the person said.
Does anyone think such as this is already discounted by the markets?
Jim 69 y/o
"...Texans...the lowest form of white man there is." Robert Duvall, as Al Sieber, in "Geronimo." (see "Location" for examples.)
Dedicated to the idea that all people deserve a chance for a healthy productive life. B&M Gates Fdn.
Good judgement comes from experience; experience comes from bad judgement. Unknown.
Who are these "people who use the system"? We have conducted several interviews of fund managers. 70 percent? 30 percent? No. There are no bids. None. As of yet, there is no price.
Once again, we heard it here first. Bear Stearns has apparently fessed up:
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