Basis Hedge Fund Goes Bankrupt

The bankrupt fund invested globally in high-yielding corporate securities and structured credit securities, including asset-backed securities, mortgage-backed securities, collateralized debt obligations and collateralized loan obligations.

The Basis Yield Alpha fund aimed for returns greater than the London Inter-Bank Offer Rate, according to the company's Web site.

Basis Yield Alpha, a Cayman Islands-based hedge fund backed by Australian funds management firm Basis Capital, filed for bankruptcy protection Wednesday.

對市場不會有任何影響。我估計還會有更多的小基金會關門的。大概這波下來，對衝基金會倒掉10%左右，大部分是無名基金，可能會有一兩個有影響力的基金。


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AP
Basis Hedge Fund Goes Bankrupt
Wednesday August 29, 4:45 pm ET
By Stephen Bernard, AP Business Writer 
Basis Yield Alpha Hedge Fund Files for Bankruptcy Protection

NEW YORK (AP) -- Basis Yield Alpha, a Cayman Islands-based hedge fund backed by Australian funds management firm Basis Capital, filed for bankruptcy protection Wednesday.

Basis Yield Alpha filed for Chapter 15 bankruptcy in New York. Chapter 15 is a newer section of the bankruptcy code that would protect the fund's assets in the U.S., after having already filed for bankruptcy in Cayman Island courts.
 
The fund had more than $50 million in assets held in the United States, according to the filing.

The Basis Yield Alpha fund began to lose value as investments it made in subprime mortgage-backed securities in the U.S. began to falter in June. Subprime mortgages are loans given to customers with poor credit history.

Investors have become increasingly worried about the value of mortgages amid rising delinquencies and defaults, especially among subprime mortgages. Those worries have spread into the larger market, leading investors to avoid purchasing nearly all mortgages on the secondary market. With almost no market for the loans, their value has fallen precipitously in recent months.

The drop in value led to margin calls, which Basis Yield Alpha was unable to meet. That led investors to issue default notices, which would have given them the right to seize the fund's assets. Default notices were issued by JPMorgan Chase & Co., Goldman Sachs Group Inc., Citigroup Inc., Morgan Stanley, Lehman Brothers Holdings Inc. and Merrill Lynch & Co.

The unmet margin calls and default notices forced Basis Yield Alpha to file for bankruptcy protection.

Basis Yield Alpha is not the first investment fund to fail after making bad bets on securities backed by subprime mortgages. Bear Stearns Cos. shut down two hedge funds in July after announcing they were essentially worthless because of bad bets on subprime mortgage-backed securities.

Basis Yield Alpha, which was established in December 2003, was one of two non-Australian funds Basis Capital managed.

The bankrupt fund invested globally in high-yielding corporate securities and structured credit securities, including asset-backed securities, mortgage-backed securities, collateralized debt obligations and collateralized loan obligations. The Basis Yield Alpha fund aimed for returns greater than the London Inter-Bank Offer Rate, according to the company's Web site.

The other non-Australian fund managed by Basis Capital is the Basis Pacific-Rim Opportunity Fund.

Basis Capital has more than $2 billion in assets.