Basis alpha turns to theta

Basis Capital yesterday appointed provisional liquidators to the Basis Alpha Yield Fund, a highly geared investor in the equity tranches of structured debt instruments.

Grant Thornton partners in Sydney, London and Cayman Islands have taken charge of the failed $1 billion fund, which has so far lost 80 per cent of its net asset value.

Basis was one of the early casualties of the US sub-prime mortgage crisis. Much of its holding in CDO equity was in sub-prime mortgage pools.

In July Basis stopped redemptions from its two funds, the Yield Fund and the Aust-Rim Diversified Fund, and then announced that the Yield Fund was in default on margin loan payments and would be wound up.

Both funds are feeder funds, with the ultimate investment management being made through Cayman Islands master funds, the Basis Yield Alpha Fund and the Pac-Rim Opportunities Fund

A statement issued on August 15 said: "The Master Fund (the Basis Alpha Yield Fund) has suffered the forced sale of some of its assets by secured creditors and the purported closing out of positions by some financiers as a result of a global market-wide increase in risk aversion and a general desire by the financiers to reduce their exposure to these assets."

A statement from Grant Thornton yesterday said the firm's appointment did not extend to any other Basis Capital funds.

But investors in the Aust-Rim Diversified Fund will have an anxious wait for news. That fund had a significant exposure (about $80 million) to the Basis Alpha Yield Fund.