ING Diversified Yield, Regular Income - CDOs, etc.

ING has been forced to suspend withdrawals from two finds after a minority of nervous investors headed for the exits. The Bloomberg article cited above has more:

Withdrawals from the ING Diversified Yield Fund and the ING Regular Income Fund were halted to protect investors, Marc Lieberman, chief executive officer of ING (NZ) in Auckland, said in an e-mailed statement. About NZ$520 million ($417 million) was invested in the two funds at the end of February.

Since August, rising defaults on U.S. subprime mortgages triggered a global sell-off of CDOs, which are fixed-income securities backed by the loans. The value of the Regular Income Fund fell 25 percent in the year ended Feb. 29 while the Diversified Yield Fund dropped 22 percent, according to the company's Web site.

ING claims "most" of the fund contains higher-quality assets, with only 10% in subprime and 6% in CDOs. Displaying a common paradox, ING is planning on selling some of the higher-quality holdings to meet withdrawal request, which of course will push the prices for those assets down, explaining much of the market action we are seeing. ING like does not want to liquidate the CDOs or subprime because it is hoping the values will come back—or perhaps the quotes on those assets are no so low, they would not be enough to meet investor withdrawals.