Hedge Funds Loan Losses

Hedge Funds Loan Losses

Hedge Funds Suffering after Racking up Losses from Loans

Hedge funds are struggling to make up big losses after the US financial sector's losses on large loans exploded in 2009.  Many lenders were hedge funds and at least "one in three dollars lent by non-bank institutions such as hedge funds, securitisation vehicles and pension funds went sour" which is much more than the 11.5% in the traditional banking sector.
The results will increase fears that, in spite of a recovery in the shares and balance sheets of many banks, the epicentre of the crisis has moved to the hedge funds and investors that gorged on cheap credit in the run-up to the turmoil.

The importance of these non-bank institutions was underlined by the review's finding that they held 47 per cent of problem loans in spite of accounting for only 21.2 per cent of the total loan pool.  Overall, the US financial sector's losses on loans in early 2009 reached a record of $53bn, nearly triple the previous high in 2002.

The number of loans edging into the danger zone has also surged. Some 15 per cent of the $2,900bn SNC portfolio was classified as "substandard" - the second of the four categories used by regulators - and worse, up from 5.8 per cent in 2008.  Read more..

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