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ABX sinks Peloton

Prime tranches on the ABX are set to fall further over the next few days. Current lows are thought to be on the back of some particularly grim remittance data - not yet public - detailing losses, delinquencies et cetera.

Here’s the latest ABX graph (close Thursday) AAA 07-2 series

The market was awash with talk of a large ABS hedge fund liquidation yesterday, as reported on Markets Live. And indeed the most recent dip in the index is what broke high profile hedge fund Peloton on Thursday.

The fund had just built up a large position in AAA rated mortgage securities - exactly the kind of ABS the ABX tracks. As the price fell, the cost of Peloton’s arbitrage rose and brokers made margin calls.

The Peloton letter to investors is available on FT Alphaville here.

With Peloton’s $9bn of assets being hawked by brokers, traders are gritting their teeth for another sharp downtick on the ABX.

This entry was posted by Sam Jones on Friday, February 29th, 2008 at 8:12 and is filed under Capital markets, Hedge funds. Tagged with ABX, Peloton. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

1. Feb 29   19:33 Posted by SW61 [report]

   CNN reports,

   The trade publication Hedge Fund Alert recently noted that Peloton’s multi-strategy fund was hiring. Earlier this month, the Financial Times published a fawning profile of Grant and Beller, noting that Peloton had an unusually large risk-management staff.

   No fighting please, girls.

2. Feb 29   13:52 Posted by anonymous [report]

   would the managers have collected their 2007 performance fee on the 80% rise? i can imagine that investors would feel aggrieved if they collect $200m in performance fees in ‘07 and then the fund impodes two months into ‘08

3. Feb 29   9:18 Posted by Alea | Hedge Fund Implosion: Wall Street Blamed [report]

   […] Peloton Partners in $2bn assets sale ABX sinks Peloton ( or maybe Peloton sinks ABX ) Peloton fund sets winning pace […]

4. Feb 29   9:15 Posted by Barry Stutner [report]

   surely ’superstars’ from Goldman should understand the distinction between ‘AAA’ rated mortgage securities and ‘AAA’ rated tranches of subprime CDOS (ABX.HE)?