Credit-swaps force Canadian hedge fund to suspend new buyers

Date: Thursday, August 2, 2007
Author: Advisor.ca

Friedberg Mercantile Group Ltd. announced Thursday that it is suspending new subscriptions of its Friedberg Global Macro Hedge Fund because of "the high volatility of markets." Units will continue to be redeemable during this period.

FMGL says the fund has taken aggressive positions in credit-default swaps to take advantage of the anticipated serious liquidity contraction/credit crunch in the U.S., which is likely to have wide global repercussions. However, FMGL says that with the recent high degree of volatility in credit derivatives and the extreme difficulty in faithfully replicating the position of over-the-counter traded credit-default swaps the fund currently maintains, any substantial inflow of subscriptions is likely to dilute existing investors.

As a result, Friedberg Mercantile Group will temporarily close the fund to new subscriptions. It will review this decision on an ongoing basis with a view to reopening the fund to new investors as soon as is appropriate.