Both Bear Stearns Hedge Funds Have Positive Valuations

That seems to be what the WSJ is reporting this afternoon, at least:

The assets in Bear's more-levered fund, the High-Grade Structured Credit Strategies Enhanced Leverage Fund, are worth virtually nothing, according to people familiar with the matter. The assets in the larger, less-levered fund are worth roughly 9% of the value since the end of April, these people said.

"Virtually nothing" means a small positive sum. And the larger fund seems to be clearly in the black.

This is a big piece of good news for the market, which, judging by the activity in the ABX indices yesterday, was worried that Bear would come out with some nasty figures indeed.

As it is, investors in the funds will have lost their money. But the banks which lent money to the funds will get it all back, and neither Barclays nor anybody else is going to have to suffer hundreds of millions of dollars in loan losses.

This is much better news than anybody had any reason to expect. After all, if Bear had to bail out the less-leveraged fund to the tune of $1.6 billion, what were the chances that the more-leveraged fund would still have some money left over after being liquidated? The danger of leverage, always, is that you stand to lose more – sometimes a lot more – than your initial investment. But that danger, in this case, seems to have been narrowly avoided.