Top funds may have lost $4 billion on Freddie, Fannie this week

By Muralikumar Anantharaman

BOSTON (Reuters) - Some of the best known U.S. fund firms probably suffered significant losses in this week's meltdown in the stocks of mortgage finance agencies Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz).

Among the casualties may be the one-time star stock-picker Bill Miller at Legg Mason (LM.N: Quote, Profile, Research, Stock Buzz), whose funds have owned a series of companies that have been battered by the credit crisis and the weakening economy.

Others include Capital Group, including its Growth Fund of America, which is the largest U.S. fund, AllianceBernstein (AB.N: Quote, Profile, Research, Stock Buzz), and Fidelity Investments.

Altogether, the four fund groups may have seen a decline of as much as $4 billion in the value of their holdings in the two agencies in the past week. None of the fund groups would comment.

The precise size of the losses is difficult to pinpoint because the fund groups have not reported their current holdings and the estimates are based on their last disclosures.

Fannie and Freddie's stock drops and the overall market weakness could lead to more outflows and hurt returns at mutual funds which owned a large chunk of these holdings.

The stocks plunged this week on worries about their capital positions due to a deteriorating housing market. Fannie fell 45.4 percent while Freddie lost 46.5 percent. The worries over the two have cast a pall on financials and the broader U.S. stock market.

"That certainly has impacted Miller's fund. At Growth Fund of America, the damage has been limited," said Greg Carlson, a mutual fund analyst at Morningstar.