BlueCrest to shut asset-based lending fund

By Martin de Sa'Pinto

GENEVA (Reuters) - British asset manager Blue Crest is winding down its Specialty Asset Finance Fund after losses and redemptions forced the fund to close many positions at a heavy loss, sources familiar with the fund told Reuters.

BlueCrest declined to comment on the fund.

Three industry sources said the fund, which had assets of $200 million late last year, is one of many using an asset based lending (ABL) Strategy to be vexed by redemptions this year, with leveraged funds such as BlueCrest's hit particularly hard.

"It's an open secret the fund is winding down, I'm surprised I haven't seen anything written about it yet," said one fund of funds manager.

Another source, who manages an ABL fund of funds similar to the BlueCrest fund, said funds using the strategy have had redemption requests for up to 80 percent of their assets.

Most hedge fund strategies saw asset outflows during the financial crisis as investors fled to safer and more liquid asset classes such as treasuries.

This was particularly awkward for ABL funds, whose assets are often tied up and difficult to liquidate--the strategy involves making business loans for projects such as factory expansions, with the loans secured against the business assets.

"Blue Crest saw redemptions rise after it lost money in the Petters (alleged) fraud, and its leverage made things worse. It has had to deleverage fast to meet redemptions, forcing the fund to sell assets into a bad market and accentuating losses," the source at the ABL fund said.