The truth about Asian investment banking

The truth about Asian investment banking

Reality bites

China’s $1.7 trillion hangover

China’s $1.7 trillion hangover

Up to 40% of China’s $1.7 trillion LGFV loans are at high risk of default. What’s a panicking Beijing to do?

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July 2007

Editorial: Permanent headache

As margin lenders to the two struggling Bear Stearns hedge funds High-Grade Structured Credit Strategies Enhanced Leverage Master Fund and High-Grade Structured Credit Strategies Master Fund scrambled to avert losses in late June, another vehicle with links to the funds was facing up to problems of its own. Everquest Financial, which was recently formed by Bear Stearns (and had filed a registration with the SEC on May 9 to list), is one of a raft of new listed permanent capital vehicles that have been investing in the equity and first-loss parts of structured credit investments and been hailed as a vital new source of liquidity in this market.


These equity vehicles are very unusual in structured credit in that they tap into the retail investor base (see Asset-backed securities: Funds list to ease first-loss sales, Euromoney, May 2006). Everquest is one of the largest of this new breed of funds and is co-managed by Bear Stearns Asset Management (BSAM) and hedge fund Stone Tower Capital.

The two Bear Stearns High Grade (BSHG) hedge funds that have attracted so much negative attention are managed by Bear Stearns veteran Ralph Cioffi – who also happens to be co-chief executive of Everquest together with Michael Levitt of Stone Tower. The listing particulars reveal that the BSHG funds own 67% of Everquest, and have transferred equity in 10 CDOs to the permanent capital vehicle for a...


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