That giant sucking sound you hear is your hedge fund liquidating. Or, it is if you are Ross Perot. The former presidential hopeful's fund Parkcentral Global Hub Ltd., had apparently levered up in a big way and the unwinding is proving to be painful. One surmises from the article that a crash in commercial mortgage backed securities is one cause.
We urge Mr. Perot not to feel too bad. There is a long history in the United States of failed bids for president crippling a man, reducing him to an irrelevance as anything but an object of suspicion, and this becoming so withering that the kilowatts consumed by his (admittedly unwieldy) home consume the attentions of dozens of nay-sayer hanger-ons.
The woes of these funds promise to put more strain on the banking sector. Banks that have made short-term loans to these funds mightn't recoup all their money even if the funds liquidate. Parkcentral Global Hub Ltd., the fund overseen by Parkcentral Capital Management LP, a Plano, Texas, firm controlled by the Perot family, peaked this year at $2.5 billion in assets. It used borrowed money to amplify its bets, said people familiar with the matter, and began dumping assets last week.
That leverage helped hasten the fund's meltdown as the commercial mortgage-backed securities, or CMBS, market cratered last week, and the borrowings also could leave lenders with tens of millions of dollars in losses, the people said.
A Parkcentral spokesman Tuesday confirmed that the fund has been forced to liquidate to pay off creditors, but he declined to elaborate. He blamed the "unprecedented upheaval of the capital markets in general and the freezing of credit markets in particular."