Two of the highest paid dealers in the City, Stuart Fiertz and Jonathan Lourie, today had to admit that the value of their listed fund investing in mortgage-backed bonds had fallen by a quarter in three months, hit by the fall-out from the housing market on both sides of the Atlantic.

Shares in Queen's Walk Investment, which is managed by Mr Fiertz and Mr Lourie's hedge fund Cheyne Capital and in which Cheyne owns a 45 per cent stake, fell 5 cents to €6.3 today after it revealed it had taken a €108 million (£73 million) write-off bringing the equity capital of the fund to €294 million at the end of March against €402 million at the end of December.

Mr Fiertz, who is said to have shared in a £75 million bonus pot at the end of December after just nine months, is quitting as a director of Queen's Walk in order to assume overall responsibility for the fund at Cheyne Capital, replacing the role carried out by Ravi Joseph, who remains with Cheyne.

Back in early April when Queen's Walk warned about deteriorating values, some outside investors, including activist fund Laxey Partners and Scottish Widows Investment Partners, were said to have called for the fund to be liquidated in order to get their cash back at asset value.

But today Mr Fiertz said that he was pressing ahead with a plan to buy back some 10 per cent of Queen's Walk shares and diversify the portfolio into new countries. In response to a question he also said that he was currently happy with the fee structure - which gives the fund managers at Cheyne a porportion of the equity value of the fund as well as annual fees - but he admitted he was discussing with the board its "appropriateness".

He said that he was "very disappointed with the results for the financial year" which were brought about by an "unprecedented combination of circumstances".

The fall out in the US sub-prime mortgage market hit the value of the group's mortgage securities while a trend in the UK for home borrowers to wait until their two-year lock-in expired before remortgaging meant there was a loss in early cancellation fees and in future mortgage interest payments.

Queen's Walk also had to write down the value of UK mortgage loans because of the possibilty of increased defaults as rising interest rates hit home.

Bear Stearns is currently trying to arrange a rescue bail out for two US sub-prime hedge funds that it runs but other investors such as Merrill Lynch are refusing to back it and instead are seizing their assets and selling them off. The run of forced sales is triggering the mark down in value of US mortgage backed securities held by hedge funds across the world.

Queen's Walk said that it had sold three of its four portfolios of US mortgage securities after the end of March for €22.8 million, 53 per cent below their book value at the end of December. It also sold several UK investments for €93.2 million, 24 per cent below their end of December book value.

Overall the fund lost €67.7 million in the year to the end of March against a €9.7 million profit last year.

Caliber Global Investment, the rival London-listed fund, last month said that it made an $8.8 million-loss from the fallout in the US sub-prime market.

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