Thursday, August 2, 2007
Haircuts are increasing because investment banks generally are uncomfortably long credit risk – through bridge loans to private equity buy-outs, repo financing to hedge funds and warehouses for CDO managers,” Mr King says.
When an ordinary sounding Australian mutual fund run by Macquarie Bank’s asset management division warned investors they could lose up to 25 per cent of their money this week it was shocking for two reasons. First, it was a retail fund, so the investors were everyday people. Second, their money had not been anywhere near US subprime mortgages, which have been at the centre of recent market turmoil.