Bear Stearns to Liquidate Bond Hedge Fund, People Say

Bloomberg reports:

Bear Stearns Cos., the second-biggest U.S. underwriter of mortgage bonds, is liquidating holdings from one of its hedge funds after making money-losing bets on subprime mortgage bonds, said three people with knowledge of the decision.

Bear Stearns sought bids today from prospective buyers for about $3.8 billion of mortgage securities from the fund, said the people, who declined to be identified because the plan isn't public. The 10-month-old Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Fund, which is down about 20 percent this year, had about $600 million of investors' money and borrowed to increase its buying power, one of the people said.

There will be more to this story.