Houston Chronicle- Bear Stearns Cos. told clients today that a meltdown in the subprime mortgage market has made the assets from two of its flagship hedge funds almost worthless.
Both funds were squeezed after Bear Stearns made wrong-way bets on the home mortgage market and was caught as loans to risky investors began to default. The assets in one of the funds are essentially worthless, while another is worth 9 percent of its value at the end of April, according to a document obtained by The Associated Press.
Bear Stearns, the nation’s fifth-largest investment bank, began disclosing in March that the two hedge funds had sustained heavy losses tied to subprime loans extended to risky borrowers. At the time, its High-Grade Structured Credit Enhanced Leveraged Fund was worth about $638 million  and now has no value.
Meanwhile, the larger and less-leveraged High-Grade Structured Credit Fund lost 91 percent of its value. It was worth about $925 million before taking on losses in March.
“In light of these returns, we will seek an orderly wind-down of the funds over time,” Bear Stearns said in a letter that will be sent to clients who might have questions about the funds. “This is a difficult development for investors in these funds, and it is certainly uncharacteristic of Bear Stearns Asset Management overall strong record of performance.”
