Bear Stearns funds enter bankruptcy

Date: Thursday, August 2, 2007
Author: HedgeCo.Net

Independent- Two Bear Stearns hedge funds filed for bankruptcy protection, while investors in a third fund managed by the Wall Street bank were barred from withdrawing their money amid concerns that the credit crisis is spreading to other parts of the economy.

The bankruptcy filings headlined a raft of horrendous news for the $1.5 trillion (£740bn) global hedge fund industry and fanned fears of a profound global market correction that could reverberate into sectors far beyond America's sub-prime mortgage market, where the problems began. For the second time in a week, the FTSE 100 index suffered a major one-day fall, shedding 110 points, or 1.7 per cent of its value. Last week, the benchmark index had its biggest one-day drop in four years.

Yesterday's rout was set off by fresh concerns about the US credit market. Sowood Capital Management, which manages some of Harvard University's endowment, informed investors that it had lost about half of the $3bn that they had invested with the firm due to wrong bets on risky loans in America. Macquarie Bank, the Australian investment bank, told investors in two of its hedge funds that they were likely to lose a quarter of their cash. Shares in Man Group were hammered after it revealed poor weekly performance, too.