Bear Stearns Cos., already forced to shut two hedge funds that bet heavily on the risky subprime-mortgage market, is now facing big losses in a third fund that has roughly $900 million in mortgage investments, according to people familiar with the matter.
The fund, known as the Bear Stearns Asset-Backed Securities Fund, ran into trouble in July and has refused to return investors' money for the moment, according to these people. One of these people said the redemption requests were postponed in hopes that the fund's assets would rebound in value. The fund contains a range of mortgages, but only a small slice of them that are considered subprime, the area that has given so many firms heartburn in recent weeks. Unlike the two other Bear funds that are being closed, this fund is not leveraged.
The asset-backed fund was up about 5% between the beginning of the year and the end of June according to these people. But faced with a slew of mortgage markdowns in July, its performance appears to have plummeted. It is not known how much, if anything, Bear owns of the fund. Its shares were down about 5% Tuesday, to $121.22.
And the hits just keep coming, don't they?
