International Herald Tribune- Absolute Capital Group, an Australian hedge fund that invests in collateralized debt obligations, or CDOs, suspended withdrawals from two of its funds Thursday afterforecasting losses resulting from a rout in U.S. subprime mortgages.
The firm froze its Yield Strategies Fund and Yield Strategies Fund NZD, which together have about 200 million Australian dollars, or $177 million, under management, said Bill Entwistle, the chief investment officer. The company, based in Sydney, is 50 percent owned by ABN AMRO’s Australian unit.
Absolute Capital, which says it does not invest in the riskiest portion of CDOs, is suffering from the widening impact of delinquencies on U.S. home loans to people with poor credit. Basis Capital Fund Management, another Australian hedge fund battered in the North American market, has hired Blackstone Group to negotiate with bankers to help it limit losses.
“Because of the contagion from subprime, all of the credit sectors are re-pricing,” Entwistle said. “There are lots of sellers and no buyers. The market has to settle down before we can get some clarity.”
The Yield Strategies Fund returned 6.4 percent the past year while the Yield Strategies Fund NZD, which started in May, gained 0.2 percent to June 30.
