International Investing

According to the Financial Times, buyers are showing no interest whatsoever in the wreckage left over from Bear’s two subprime hedge funds — at least, not at Bear’s ask price of 11 cents on the dollar.

Investors in the worse-hit of two stricken Bear Stearns hedge funds are offering to sell their holdings for as little as 11 cents on the dollar but still finding no buyers, according to unfilled trades on Hedgebay, a secondary market for funds.

Vulture funds and others have been quick to bid for holdings in the two funds, but the best bid for Bear Stearns High-Grade Structured Credit Strategies Enhanced Leveraged Fund, the more geared of the two, is just 5 cents on the dollar.

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Private sales of stakes are the only way investors can exit the two Bear funds, after the bank suspended redemptions in May amid a wave of withdrawals.

“There are buyers but they can’t agree on price,” said Jared Herman, co-founder of Bahamas-based Hedgebay.

The less-geared Bear Stearns High-Grade Structured Credit Strategies Fund, which the bank has rescued with a $1.6bn loan, is being offered at about 70 cents on the dollar. The fund is only attracting bidders at about 30 cents, according to people who use the system.

All the talk about “hedge funds containing the contagion” was laughable. Sure, there are bidders; but the value of the bids is less than half of the offers!

Also, note that the bigger Bear fund will probably end up liquidating for 5-10% of total value. You can’t do much worse than -90% return. The question is, how many other funds are sitting on the same time bomb?