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Rating:Barclays Fund Reportedly Challenged Not Rated 3.0 Email Routing List Email & Route  Print Print
Tuesday, August 14, 2007

Barclays Fund Reportedly Challenged

Reported by Sean Hanna, Editor in Chief

BGI's corporate parent is being buffeted by the subprime flu according to a report published by Bloomberg News. Meanwhile, BGI itself may see challenges from one of its hedge funds, reports the Wall Street Journal.

These issues should not effect BGI's exchange-traded funds, as the funds' value is determined by their holdings, not the bank's credit. However, BGI's newer exchange-traded notes (ETN) currency fund products do have exposure to the issuer's credit.

Questions about whether Barclays could be selling stocks to raise capital were first raised by blogger Jeffrey Matthews on Monday morning. Matthews noted sell-offs in many stocks, including Teleflex, Ashland, Computer Sciences, Office Depot, CIT and Robert Half. A common factor for the companies is a Barclays banking relationship, noted Matthews.

Meanwhile, stock analysts at Panmure Gordon & Co. gave Barclays, the parent of San Francisco-based Barclays Global Investors, a "sell" rating, noting that the bank may have "significant" risks from loans to hedge funds and private equity firms.

Analyst Sandy Chen told Bloomberg that the bank holds asset-backed commercial paper, some of which may contain subprime mortgages and that the London bank could be hit by loans to hedge funds and private equity firms.

"We think there is a material risk that some of Barclays Capital's counterparties may be in trouble," said Chen. "What was previously a strong source of growth could turn into an area of weakness."

The WSJ reports that BGI, the San Francisco-based asset management subsidiary of Barclays, is seeing 32 Capital Fund, a quantitative hedge fund, face a "challenging" time.

Quoting a "person familiar with the fund", the WSJ states that the fund saw improvements Thursday and Friday and reports that "clients hadn't raced for the exits."

Lance Berg, a BGI spokesman, said BGI "view[s] this event as liquidity driven, not fundamentally driven." 

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