August 14, 2007 (LPAC)--Hours after Coventree Capital's announcement this morning, a second fund--in what will be a worldwide flood of such "runs" against Asset-Backed Commercial Paper (ACBP) funds by tomorrow's rollover deadline--has halted withdrawals in the midst of an investor run on its assets. Sentinel Management Group Inc., a 30-year-old, $1.6 billion "high-yield money management fund" based in Northbrook, Illinois, asked the Commodities Futures Trading Commission for permission to halt investor withdrawals, even while claiming that all of its paper was of the highest grade.

Most of Sentinel's investments are in the short-term commercial paper called ACBP, which as LPAC has reported since Aug. 8, is at the heart of a $1 trillion liquidity crisis as the Aug. 15 date for redemption or rollover of large volumes of this paper arrives.

"Investor fear has overtaken reason and has induced a period in which most securities have simply ceased to trade," said Sentinel Management in a letter to its clients--or former clients--which got right to the heart of the problem. ACBP "conduits," often set up by and for banks, invest not in the faith and credit of corporations as with corporate bonds, but in the computer-modeled "value" of various collateral assets, many of them based in the collapsing U.S. mortgage bubble and now plunging toward zero value, as Bear Stearns was the first to announce one month ago. Sentinel's client letter continues, "We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value."

The wave of similar announcements by hedge funds and other in coming days will trigger a second wave of the international bank credit crisis which hit last week.