Hedge-fund manager Basis Capital Funds Management Ltd. said losses in its Yield Alpha Fund may exceed 80% after it was hit by the fallout from the U.S. subprime-mortgage crisis.
Basis Capital last month appointed Blackstone Group of the U.S. to act as financial adviser on two of its Cayman Islands-domiciled funds -- the Basis Yield Alpha Fund and the Basis Pac-Rim Opportunity Fund -- in an attempt to avoid a fire sale of their assets.
Other Australian funds, including Macquarie Bank Ltd.'s Fortress Investments and Absolute Capital, have said they face big losses because of fallout from the subprime problems. In a sign that bond-market turmoil is spreading to investments that are considered conservative, Sentinel Management Group Inc., a U.S. money manager, on Tuesday halted withdrawals from cash accounts, citing "panic" conditions. Sentinel manages money for hedge funds and commodities traders in what are loosely akin to money-market funds.
Basis Capital warned the net asset value of the Yield Alpha Fund could be halved and suspended withdrawals from its two domestic funds, the Basis Aust-Rim Diversified Fund and Basis Yield Fund, which feed into the two offshore master funds, because volatile markets meant it couldn't compute the funds' net asset value.
This is not what we need right now.