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| Boss rues collapse of hedge fund | |
| (about 4 hours later) | |
| Private equity giant Carlyle Group has pledged to "stand by" investors in the firm's failed billion dollar hedge fund, the Financial Times has reported. | Private equity giant Carlyle Group has pledged to "stand by" investors in the firm's failed billion dollar hedge fund, the Financial Times has reported. |
| The firm's co-founder David Rubenstein told the newspaper that he was working on ways to address clients' losses. | The firm's co-founder David Rubenstein told the newspaper that he was working on ways to address clients' losses. |
| His comments came after Carlyle Capital Corporation (CCC), a unit of Carlyle Group, said it was unable to pay back its debts and may be liquidated. | His comments came after Carlyle Capital Corporation (CCC), a unit of Carlyle Group, said it was unable to pay back its debts and may be liquidated. |
| Some $600m (£295m) of clients' money will be lost if the fund fails. | Some $600m (£295m) of clients' money will be lost if the fund fails. |
| Global problems | |
| The fund is the latest casualty of the widening credit market crisis. | The fund is the latest casualty of the widening credit market crisis. |
| CCC's problems emerged last week when it became apparent that the fund was not going to be able to service its debts. | CCC's problems emerged last week when it became apparent that the fund was not going to be able to service its debts. |
| Some of the banks that had lent CCC money started liquidating assets, and the fund's shares, which are listed in Amsterdam, were suspended. | Some of the banks that had lent CCC money started liquidating assets, and the fund's shares, which are listed in Amsterdam, were suspended. |
| I don't think one fund out of 60 will spoil a reputation built up over 20 years David RubensteinCarlyle Group | |
| On Wednesday, CCC said that it had not been able to refinance its business and it had so far defaulted on about $16.6bn (£8.1bn) of its debt. | On Wednesday, CCC said that it had not been able to refinance its business and it had so far defaulted on about $16.6bn (£8.1bn) of its debt. |
| CCC said that it would collapse if, as expected, its lenders seized the remaining assets. | CCC said that it would collapse if, as expected, its lenders seized the remaining assets. |
| Other investment funds may now face similar problems, analysts fear. | Other investment funds may now face similar problems, analysts fear. |
| Mortgage worries | |
| In the past year, CCC and other global banks and hedge funds have been buying mortgage-backed securities. | In the past year, CCC and other global banks and hedge funds have been buying mortgage-backed securities. |
| These were assets which offered strong returns and were seen as relatively safe investments because the US housing market had been enjoying relatively robust and uninterrupted growth. | These were assets which offered strong returns and were seen as relatively safe investments because the US housing market had been enjoying relatively robust and uninterrupted growth. |
| However, their value has plummeted in recent months after higher interest rates led to a drop in the housing market and a surge in mortgage defaults, especially in the sub-prime sector which focused on clients with low incomes or poor credit. | However, their value has plummeted in recent months after higher interest rates led to a drop in the housing market and a surge in mortgage defaults, especially in the sub-prime sector which focused on clients with low incomes or poor credit. |
| With the sharp slowdown in the US housing market, doubts have emerged about the viability of mortgage assets even if they are not linked to sub-prime borrowers with poor credit. | |
| And it is this which has hit Carlyle - which held Triple A mortgage securities backed by government-sponsored mortgage lenders.. | |
| Helping hand | |
| Despite the problems, Carlyle's boss was upbeat about his company's future. "I don't think one fund out of 60 will spoil a reputation built up over 20 years," Mr Rubenstein told the Financial Times. | |
| "We have stood behind out products in the past and we are working on ways to address the losses that are being suffered by investors," he said. |