You would think that the Tequesta Mortgage fund would be seen as one of the more safe hedge funds. After it all, it specialized in prime loans of a certain heft. These jumbo loans--and I note the jumbo threshold has just been raised--were far from subprime and Alt-A. But they declined in value as the crisis clamped credit markets in general. Banks had to dump these bonds to get liquid, further slamming the market. The result: Even a conservative, low-margin hedge fund faced a series of margin calls from prime brokers--in this case Bears Stearns, Citigroup and others. The fund recently collapsed, no longer able to meet margin calls.  

For more:
- here's the Fortune article

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