The next shoe might be a bucketful

Thu Oct 30, 2008




The mark-to-market accounting that has caused Wall Street so much grief this year is coming to hedge funds in 2009 By Irwin Speizer When the plunging value of subprime mortgages caught Michael Vranos short last year, investors began lining up to get their money back from his Ellington Capital Management. Vranos responded by halting redemptions, arguing that the mortgage-backed securities he held were too difficult to value.

Vranos and other hedge fund managers won't have the luxury of taking a flyer on current fair-value assessments much longer. The new accounting rules that have forced Wall Street firms to mark to market their toxic securities, taking down Lehman Brothers and pummeling the rest of the industry, will go into effect for hedge funds next year. Under the new Financial Accounting Standards Board Rule 157, hedge funds will have to disclose how much of their holdings fall into three distinct categories, including one for...

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