Galena Street Fund - Subprime

Galena Street Fund, a hedge fund under the Braddock Financial Group that held $300 million in assets, is set to be liquidated after realizing significant losses on subprime investments. On July 6^th latimes.com noted:

Galena Street lost 3.5% in the first five months of this year, followed by a loss of 6% to 8% in June, as increasing defaults on mortgages issued to the riskiest borrowers reduced the value of the fund's holdings, said Harvey Allon, chief executive of the Denver-based company.

The decline in prices of sub-prime mortgage bonds accelerated in June as two hedge funds run by Bear Stearns Cos. collapsed. Galena Street had $500 million at its peak in 2005. Unlike the Bear funds, it has no debt, according to a July 2 client letter. Braddock is considering starting a new fund to wager on volatility in mortgage-backed securities, Allon said. ...

Galena Street clients will receive cash representing about 20% of their stakes this week. Additional refunds will follow as managers sell assets, the investor letter said.

The fund, which was started in 2002, returned 6.85% last year. Hedge funds globally returned an average of 13% in 2006, lagging behind the 15.8% gain of the Standard & Poor's 500 index, according to Chicago-based Hedge Fund Research Inc.

The New York Post noted that as of June 30 nearly 60% of Galena's investors had requested redemptions. Further, due to Galena not using any leverage, the liquidation is not forced.