Problems worsen for Basis Capital

Discussion in 'Wall St. News' started by boxster332, Jul 19, 2007.

  1. Australia's Basis Capital has indicated that the losses incurred by its Basis
    Yield Fund are more extensive than previously thought. The hedge fund manager
    says the value of the fund has fallen by more than 50 per cent. It had
    previously advised of a 14 per cent fall in the fund's value during June
    2007. A consortium of banks has stepped in to sell some of the fund's assets
    in order to reduce investors' exposure to the losses, and accounting firm
    Grant Thornton has been appointed to manage this process. Basis Capital has
    been hit by the problems in the sub-prime mortgage market in the US; Original
    article by Jonathan Barrett; The Australian Financial Review; 20 July 2007;
    page 73 Abstract by ABIX/LexisNexis

    More fun to come
  2. its funny how all these funds show months and months of gains and then all of a sudden they are bankrupt. That just doesn't happen without something really fraudulent going on.
  3. leverage
  4. yep. thats all that really matters and it cuts both ways.
  5. They were 'market to model' and showed gains, as trades occur due to distress sales, the securities are 'marked to market' and begin to show losses. The more trades occur on the bid, the lower the last price, pushing the model valuation metric lower.
  6. Its very simple math actually. ABX 07-1 AAA currently at 96-98. A fund that is 10x leveraged who owns them at par is losing 4% levered 10x and investors have magically lost 40% of their investment.