Thursday, March 12, 2009

The Utter Worthlessness Of Subprime Assets

There is likely no better example of just how totally worthless subprime "assets" are in the current market than the ongoing liquidation of Carrington Investment Partners. The Greenwich hedge fund, which shut down in late 2007 with about $1 billion in assets, had initially locked up its investors for a year while it was proceeding with an orderly liquidation. Well, the liquidation resulted in zero sales, a 10% decline in AUM on top of the destruction in 2007 and another year of freezes. In the meantime, investors, most notably Joseph Umbauch, the magnate behind Mistic Beverage, have filed numerous lawsuits against the fund operator.

Bruce Rose's Carrington has resorted to a desperate attempt of salvaging anything by selling between $50 and $100 million in shares via the Hedgebay secondary market broker according to Hedge Fund Alert. And while in most other cases of liquidation, even involving litigation, the seller sees at least bids of pennies on the dollar, Carrington has attracted exactly zero bids to date. Maybe if potential buyers get the backing of TALF to buy these kinds of horrendous assets, investors, who had put money into hedge funds investing in illiquid, real-estate backed assets, wouldn't be entirely wiped out.... This may be just the excuse for Obama to come up with yet another market recovery alphabet soup program, as well as some additional TV time.

For some laughs we refer you to the last available investor letter issued by Carrington. Sure brings fond memories of the insane pre-credit bubble burst times. Also a primer on how to advise your investors tongue-in-cheekly that your assets are bunch of toxic garbage.
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James said...

Just makes this nonsense about hold to maturity even more surreal.

"Cassandra" said...

For the record, it's Joe "Umbach", and he was affectionately known as The Wine Cooler Dude, a title based as much upon his "invention" of the beverage segment as the fact that by the end of most PB Cap Intro gigs he attends, he has, so to speak, consumed copious amounts of his own errrr ummm cooking. Joe's motto: invest first, ask questions later. Hate to say he had it coming, but...