Post by unlawflcombatnt on Aug 1, 2007 3:53:08 GMT -6
Below are excerpts from a New York Times article about the demise of Sowood Capital.
Hedge Fund Forced to Sell Its Portfolio
7/31/07
By JENNY ANDERSON
"At the beginning of the summer, Sowood Capital was a $3 billion hedge fund run by a money manager who hailed from the team that built Harvard’s endowment into the $30 billion giant that it is today.
Yesterday, Sowood sent out a letter to investors indicating that heavy losses in the credit market had caused the fund to lose more than half its value, prompting it to sell its portfolio to another hedge fund and return the remaining $1.5 billion to investors.
With that, Sowood becomes the latest hedge fund hit by a tightening of the credit markets that started in subprime mortgages and has expanded into the broader market, including the loans and bonds used to finance leveraged buyouts.
At one time, using leverage, or borrowed money, the fund had $12 to $15 billion worth of positions.
“Today we made the painful and difficult decision to sell substantially all of the funds’ portfolio to Citadel Investment Group,” said a letter from Sowood’s founder, Jeffrey B. Larson. “Given what we were facing and our uncertain ability to meet margin calls, we sought other buyers for some or all of the positions. Citadel offered the only immediate and comprehensive solution.”
Like Amaranth Advisors, the $9 billion hedge fund that last year lost $6 billion in one week, Sowood Capital got caught with leveraged positions — bonds and derivatives — whose value plummeted in a remarkably short time in markets with few buyers and with lenders that started demanding more collateral...."
Hedge Fund Forced to Sell Its Portfolio
7/31/07
By JENNY ANDERSON
"At the beginning of the summer, Sowood Capital was a $3 billion hedge fund run by a money manager who hailed from the team that built Harvard’s endowment into the $30 billion giant that it is today.
Yesterday, Sowood sent out a letter to investors indicating that heavy losses in the credit market had caused the fund to lose more than half its value, prompting it to sell its portfolio to another hedge fund and return the remaining $1.5 billion to investors.
With that, Sowood becomes the latest hedge fund hit by a tightening of the credit markets that started in subprime mortgages and has expanded into the broader market, including the loans and bonds used to finance leveraged buyouts.
At one time, using leverage, or borrowed money, the fund had $12 to $15 billion worth of positions.
“Today we made the painful and difficult decision to sell substantially all of the funds’ portfolio to Citadel Investment Group,” said a letter from Sowood’s founder, Jeffrey B. Larson. “Given what we were facing and our uncertain ability to meet margin calls, we sought other buyers for some or all of the positions. Citadel offered the only immediate and comprehensive solution.”
Like Amaranth Advisors, the $9 billion hedge fund that last year lost $6 billion in one week, Sowood Capital got caught with leveraged positions — bonds and derivatives — whose value plummeted in a remarkably short time in markets with few buyers and with lenders that started demanding more collateral...."