US investment bank Bear Stearns has told investors in a hedge fund it manages that the fund's value has been wiped out following losses of billions of dollars from property.
The Wall Street firm said in a letter to investors that the fund, the Enhanced Leverage Fund, has 'no value left' while another hedge fund it runs had 'very little value left'.
The funds had previously contained a combined $20 billion in investments raised from investors and some Bear Stearns executives and also including loans from other banks.
Hedge funds are private capital pools that are typically restricted to rich investors, although large pension funds have invested in the sector in recent years.
Bear Stearns' funds floundered following risky securities investments related to sub-prime mortgages which are granted to Americans with patchy credit histories.
Such mortgage loans have been plagued in recent months by late payments and a rising tide of home foreclosures amid a persistent year-long housing market slump.
'In light of these returns, we will seek an orderly wind-down of the funds over time,' Bear Stearns' letter to investors stated. Bear Stearns has made several senior management changes in the wake of the funds' heavy losses as well as boosting its risk management oversight.
Last month, Bear Stearns blamed 'challenging market conditions' in the US housing market for a 21% decline in its fixed income revenues to $962m during the second quarter.
