The hedge fund, run by the former manager of Harvard's endowment, is liquidating after losing 57% of its value. Fortunately for Harvard, it had "only" 500 million dollars invested in this fund. This follows the high-profile collapse of two Bear Stearns credit market hedge funds, victims of the subprime debacle.
Well, Harvard can't say it wasn't warned. I posted on Feb. 27th: "[I]f I had my money in a hedge fund that even provided a hint that it invested in mortgage-backed securities, I'd be pulling my money out pronto. Remember Long Term Capital Management? These folks aren't as smart as those folks." [Concession: I can't tell from news reports what percentage of Sowoods' funds were in mortgage-backed securities, as opposed to other debt instrument.]
Note: Despite the allure of wishful thinking, even though I'm a homeowner now, I don't think the housing bubble has finished deflating.