Tuesday, July 3, 2007
US sneezes and Italy catches the latest cold
The troubles in Italy came amid fresh problems for US hedge funds linked to the subprime property crash. United Capital Markets, which has funds of $620m, said it had suspended redemptions from its Horizon Strategy hedge funds after a sudden exodus by investors. The funds are heavily exposed to collateralized debt obligations (CDOs), typically packages of mortgages sold as securities. The lead fund lost 5pc of its value in April and May. It is unclear whether United Capital faces the same crunch as two Bear Stearns hedge funds, which came to grief as rising default rates on subprime property ate into the top A-rated tranches of this form of debt.