The fallout from the US sub prime mortgage collapse has spread to the UK. Cambridge Place, the London fund manager, has been forced to close its $908M listed fund as a result.
Cambridge Place said that it would sell the assets of Caliber Global Investment, a London-listed fund, after suffering a net loss of $8.8M in the first quarter of this year.
Caliber has about 60% of its investments in the US, mostly in mortgage debts rated BBB or below. These are securitised tranches of mortgages given to people with impaired or nonexistent credit histories.
Not surprisingly such loans are high risk and carry an interest rate premium. The collapse in house prices in the US has caused borrowers to default on their payments, thus causing a knock on effect affecting those funds that bought the securities.
A sneeze in America can give Britain a very nasty cold.