New York – Bear Stearns Cos. told clients Tuesday 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.
