More subprime induced implosion

Subprime shakeout claims another fund
Caliber Global, which controlled almost $1 bln in assets, to shut down

By Alistair Barr, MarketWatch
Last Update: 2:12 PM ET Jun 28, 2007

SAN FRANCISCO (MarketWatch) -- Caliber Global Investment Ltd., a London-listed fund that controlled almost $1 billion of mortgage assets, said on Thursday that it's shutting down after turmoil in the subprime market cut demand for its shares.

Caliber, (UK:CLBR) run by Cambridge Place Investment Management, plans to sell all of its assets over the next 12 months and return as much money as possible to shareholders, the fund said in a statement. The plan needs to be approved by investors at an extraordinary meeting in August, Caliber added.

Caliber is the latest casualty of rising delinquencies in the subprime mortgage market, which caters to poorer borrowers with blemished credit records. Bear Stearns Cos. (BSC) is trying to salvage two of its hedge funds that focus on the space, while another run by UBS AG. (UBS) shut down earlier this year.

Subprime mortgage problems have also disrupted some initial public offerings. Everquest Financial, which had ties with Bear's troubled hedge funds, pulled its IPO registration earlier this week.

Carlyle Group, one of the largest private-equity firms in the world, cut an IPO of a mortgage bond fund by 25% and dropped the price, Bloomberg News reported on Thursday.

Caliber had already been hit hard by the subprime mortgage downturn. The fund had gross assets under management of $908 million at the end of March. It was almost six times leveraged and recently had a market capitalization of about $115 million.

More than half its assets were residential mortgage-backed securities and over 60% of its portfolio was from the U.S. Three quarters of the assets were investment grade and the rest were either junk-rated or unrated.

The net asset value of the fund has dropped by more than a quarter to a range of $6.50 to $6.60 at the end of May, Caliber said on Thursday.

"Following discussions with major shareholders, the board has concluded that the company should pursue an orderly return of all of its capital to investors over the next twelve months in order to maximize value for shareholders," Caliber said in a statement.

"The Board and its advisers recognize that there is insufficient demand currently for investment through listed investment companies exposed to this asset class," the fund added. Caliber shares jumped 25% to $4.70 on Thursday. The stock is still down more than 40% so far this year.

Queen's Walk Investment Ltd., (UK:QWIL) a similar London-listed fund run by Cheyne Capital, one of the largest hedge funds in Europe, has also been hit by the subprime shakeout.

Queen's Walk mainly buys the equity tranches of asset-backed securities. At the end of 2006, the fund had 86% of its assets in residential MBS. U.S. assets accounted for 12% of the portfolio.

This week, Queen's Walk reported a loss for its fiscal year, which ended on March 31. The fund's net asset value fell 27% during the first three months of 2007, the fund added.

Queen's Walk shares are down 40% so far this year. A hedge fund run by Cheyne, called the Cheyne ABS Opportunities Fund LP, is a major shareholder of Queen's Walk.