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Caliber Global Investment - Subprime ABS

2007-06-28

Count of distinct funds: 1

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stories: bloomberg.com, marketwatch.com, nypost.com

Caliber Global Investment, Ltd., a London-listed fund managed by Cambridge Place Investment Management is to be shutdown amidst losses related to their nearly billion dollars in mortgage assets ($908 million). On June 28th Bloomberg reported:

Caliber is the second U.K. fund this week to report fallout from rising defaults by American homeowners, following a $91 million annual loss for Queen's Walk Investment Ltd., run by Cheyne Capital Management (UK) LLP in London. ...

"The losses are going to be phenomenal" for funds worldwide holding subprime debt, said Peter Schiff, president of securities brokerage Euro Pacific Capital in Darien, Connecticut. "My guestimate in the subprime world is that the majority of loans are going to go into default. Not just 5 or 10 percent, but the majority."

As of March, about 11 percent of the subprime mortgages included in bonds were delinquent by at least 90 days, in foreclosure or already turned into seized property, the highest since 1997 and up from 5.37 percent in May 2005, according to a June 1 report from Friedman Billings Ramsey Group in Arlington, Virginia.

Caliber will seek an "orderly return of all of its capital to investors over the next 12 months in order to maximize value for shareholders," Caliber said in its statement. "There is insufficient demand currently for investment."

The Bloomberg article goes on to note that Caliber had reported a $9 million loss for Q1 operations but had not yet been subject to any margin calls. Notably, Deustche Bank purchased 11 percent of Caliber in March.

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Important: This fund is on our list of hedge funds that have "imploded" (see also ailing lenders). However, please note that "imploded" is a somewhat subjective. The "imploded" list contains hedge funds (or other unregulated and autonomous speculative investment funds) which have gone through some sort of permanent adverse change. This is a somewhat subjective call, and does not necessarily mean total shutdown or bankruptcy. It can also mean steep and rapid mark-downs in net asset value; or abnormal "bail-out" by corporate parents or peers in order to avoid write-downs and provide liquidity. The funds are of any type and sector.