Friday, February 15, 2008

WSJ: Things Not To Say When Your Bear Stearns Hedge Fund Is Imploding

When I saw the title of This article in the WSJ, I busted a gut laughing!

During the April 25 call, Mr. Cioffi told investors that the two funds, called the High-Grade Structured Credit Strategies Fund and the High-Grade Structured Credit Strategies Enhanced Leverage Fund, were down just slightly for the month. But figures he released to investors about a month later revealed that the Enhanced Leverage fund, which was the riskier of the two, was in fact down 23% through late April, and its sister fund down about 5%.

Nor were investors informed at the time of Mr. Cioffi’s early March move of $2 million of his own money out of the Enhanced Leverage fund and into a third fund he managed, Structured Risk Partners, that ultimately proved less risky. (Mr. Cioffi has told associates that the money transfer, which was approved by compliance officers at Bear Stearns Asset Management, was intended to show confidence in the third fund.)

It looks like the bait and switch will be prosecuted.

Got popcorn?

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