Bear Stearns shutters hedge fund

The Bear Stearns Cos. Inc. is liquidating holdings from a recently formed hedge funds after it lost money on subprime mortgage bonds, according to published reports.
The New York-based investment bank said it is seeking bids for $3.8 billion in mortgage-backed bonds to raise cash, said three people cited in a Bloomberg report.
The 10-month-old Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund, which is down about 20% this year, had about $600 million of investors’ money and borrowed to increase its buying power, one of the people cited in the report said.
As delinquencies increase on loans made to home buyers with poor credit or heavy debt loads, bondholders stand to lose as much as $75 billion on securities backed by the mortgages, according to an estimate in April from Pacific Investment Management Co., the Santa Monica, Calif.-based manager of the world’s largest bond fund.
The fund is one of the first to start liquidating because of the subprime crisis, which has already forced Irvine, Calif.-based New Century Financial Corp. and ResMae Mortgage Corp. of Brea, Calif. into bankruptcy. (InvestmentNews, April 2) .