An Undervalued Affair

Bear Stearns this past July declared two of its structured finance funds as having very little value. The two funds made bad investments in bonds linked to subprime mortgages and faced margin calls from banks and redemption requests from investors. Before their difficulty, the funds combined controlled assets of more than $20 billion.

And now, Bear Stearns is talking to Chinese institutions, particularly the CITIC Group, to sell a small stake of itself to China’s top financial conglomerate. Chief executive James Cayne, is seeking a Chinese partnership -- and possibly a much-needed capital infusion for the embattled firm

So one man’s distress is another man’s good fortune. When asked whether now would be considered an opportunity to enter into the subprime market and pick up assets at firesale prices, Craige said that Franklin was waiting for the right time to re-enter the space.

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