Friday, August 10, 2007

Investment funds hit by volatility

Investment funds hit by volatility
By Anuj Gangahar in New York and Adam Jones in Paris
Copyright The Financial Times Limited 2007
Published: August 9 2007 08:57 | Last updated: August 9 2007 21:55

Investment funds on both sides of the Atlantic were affected by recent market turmoil on Thursday. BNP Paribas shocked European markets by freezing three funds exposed to the stumbling US subprime mortgage market.

Goldman Sachs and Renaissance Technologies were also affected as performance at quantitative hedge funds reflected volatile markets.

Goldman Sachs’ North American Equity Opportunities fund saw falls of 12 per cent in July and a further 12 per cent this month. People close to the firm said no decision had been made about its future.

Funds of hedge funds familiar with the performance of Renaissance Technologies, one of the world’s biggest hedge funds, run by billionaire James Simons, said it had experienced difficulties this week as its quantitative approach struggled to deal with increasingly volatile market conditions. A spokesman for Renaissance did not return a call.

BNP Paribas, one of Europe’s biggest banks, blamed a “complete evaporation of liquidity in certain market segments of the US securitisation market” for the temporary decision to stop redemptions from the three funds, and further investments.

Collapse of demand for some forms of securitised debt made their assets impossible to value, the bank said.

Freezing the funds, which invest in asset-backed securities, was the best way to “protect the interests and ensure the equal treatment of our investors”.

Shares in BNP Paribas fell 3 per cent to €82.57 by the close on Thursday.

The funds are Parvest Dynamic ABS, BNP Paribas ABS Euribor and BNP Paribas ABS Eonia. The bank said their combined value was €1.6bn, down from about €2bn on July 27.


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