The near collapse of two Bear Stearns hedge funds, tied to the subprime market, grabbed the headlines sending stocks to their worst performance since March. Due to an increase in mortgage delinquencies and defaults, the underlying values of the hedge funds have dropped significantly since the beginning of the year. Merrill Lynch, a large investor in the funds, concerned about their performance asked for its investment back. This kicked off a flurry of activity as well as generated concern that this may be signaling larger problems ahead for credit markets.
In spite of this activity and a 2% decline in the broad market, our portfolios held up extremely well.
It was a busy weekend, so no portfolio specific commentary only the facts: