A mortgage-backed fund floated two years ago by alternatives firm Cheyne Capital Management has been hit by a net loss of close to €70m ($94m), amid a widening fallout in the market for risky loans made to home-buyers in the US and the UK.

News of the loss by Queen's Walk, a Cheyne-run hedge fund, comes days after the collapse of two Bear Stearns hedge funds due in part to their exposure to the US sub-prime mortgage sector. Sub-prime loans are risky because they are made to borrowers with poor credit histories.