Sentinel Mangement Group - Money market fund

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2007-08-17

Count of distinct funds: 1
Capital base: $1.6 billion
Loss: ?

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

Sentinel is one of the money market firms which holds collateral for futures trading. In this capacity, it invests funds in fixed-income securities, similar to a bank conduit or SIV. Last week, credit market turmoil hobbled Sentinel, and it halted client redemptions. Then, on August 17th, it filed for bankruptcy.

Sketchy things seem to have been afoot. Sentinel claimed to its depositors that it had approval from the CFTC to halt redemptions, but the CFTC claims it makes no such calls:

Sentinel is regulated by the CFTC, National Futures Association and U.S. Securities and Exchange Commission, according to its Web site.

``The decision whether to halt redemptions appears to be a business decision by Sentinel pursuant their contract with their customers and not a regulatory issue,'' Dan Driscoll, the future association's chief operating officer, said in a telephone interview.

Thus it appears Sentinel was attempting to pass the buck to regulators for the suspension. Also, Sentinel was apparently attempting to sell positions to Citadel, causing brokers Farr Financial Inc. and Velocity Futures LP to sue to regain their assets. The latest article says a judge has sought to halt any asset sales.

At this point, it seems safe to say Sentinel is done for.

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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.