Dublin-listed hedge funds investing in structured finance took another hit yesterday when it emerged that the flagship fund of London's Wharton Asset Management had lost a quarter of its money in one month and a small Swiss-run fund had collapsed.
Wharton's Y2K Finance, which is sponsored by Davy and is listed on the Irish Stock Exchange fund, said yesterday it was suspending calculation of asset values, withdrawals and subscriptions until December because of "current market turbulence". The fund plummeted 25.04 per cent in July, after dropping 7.3 per cent in June, as the European asset-backed securities in which it mostly invests were marked down savagely by brokers.
Meanwhile, Avendis, which, like Wharton, specialises in structured finance products such as collateralised debt obligations, said its Enhanced Fixed Income fund had filed for liquidation in the Cayman Islands.
Avendis appointed BDO Stoy Hayward to wind up the fund. The fund is also listed on the Irish Stock Exchange and is sponsored by Goodbody Stockbrokers. It suspended the calculation of its asset value on August 17th.
Wharton, founded by Maurice Salem and his brother in 1993, invests in property as well as running structured vehicles - including the listed Trio Finance, which raised $125 million in its London float in May last year. Trio, like many vehicles holding mainly mortgage-related securities, has seen its share price hammered, falling more than 30 per cent since mid-June to $5.54.
Y2K - which is not thought to have exposure to US subprime - is Wharton's only hedge fund forced to mark its book to market values.
Its other vehicles, backed by long-term finance, are in a position to sit out the volatility, as they are instead exposed to the risk of default by the underlying borrowers.
Mr Salem declined to comment.
Yesterday, Avendis said it was close a deal to restructure Golden Key, its SIV-lite, one of four such deals put together by Barclays Capital that have hit trouble due to the near-closure of short-term debt markets and drops in the value of mortgage-related investments.
SIV-lites are off-balance sheet vehicles run by asset managers who buy bonds backed by mortgages and other debt. - ( Financial Times service )
