There is nothing like a hedge fund blow-up to concentrate minds on Wall Street. The implosion of two Bear Stearns funds and this week’s news of attempted redemptions at another smaller hedge fund have focused attention on the quality of the underlying assets. Credit hedge funds with a penchant for subprime asset backed securities (ABS) have become more than a tad worried about the liquidity and the value of the underlying investments.

But what about the debt taken on by the hedge funds? How well financed are these particular hedge funds, especially those that are, like the Bear Stearns funds, highly leveraged? The issue here is if you are funding illiquid assets that do not trade very much using short-term money, you may have an extra problem on your hands.