What’s Left of the Fund?

Wall Street brokerages last week sold off $11.4 billion of U.S. government securities owned by Orange County’s investment fund, all of which were held as collateral for loans the brokerages had made to the fund. So how much money does that leave in the fund?

The county won’t say, but Wall Street analysts have been trying to guess. Here’s how the math might work:

* On Dec. 1, the county said the fund held bonds that would be worth about $20 billion if held to maturity. But because all bonds have fallen in value this year as interest rates have risen, the county said its fund had dropped about $1.5 billion in market value. In other words, if sold Dec. 1, the county figured the portfolio would have been worth about $18.5 billion.

* Given that the brokerages liquidated securities worth $11.4 billion at the market last week, the fund in theory should now have a market value of about $7.1 billion.

* But that $7.1 billion would include about $2.1 billion in bonds purchased on credit from Merrill Lynch and DLJ Securities--the only brokerages that have not called in their loans.

* If those loans were paid off in full, the county fund could hold as little as $5 billion now. That would be $2.8 billion less than the $7.8 billion in principal the county said has been invested by it and its municipalities.

* The $2.8-billion decline would represent a 36% loss on the fund’s $7.8 billion in principal--far worse than the county’s 20% loss estimate Dec. 1.

* But because it is not clear precisely how much in securities was sold last week--or, more important, what the exact value of the bonds remaining in the portfolio is--some Wall Street executives continue to believe that the county’s original estimate of a $1.5-billion loss may be accurate--or that the loss could be even smaller.