But the fund was borrowing heavily to speculate on interest rates staying low or declining.

During April 1987, the fund, which was worth $2 billion, borrowed more than $11 billion.

"Normally, for a mutual fund to borrow money is not difficult because we have the best collateral available."

The funds typically borrow money at very short terms, usually 28 days; they can buy bonds that do not mature for 10 years or longer.

The fund might also borrow funds instead of using the investor's money.

Some hedge funds had borrowed as much as 90 percent of their positions, traders said.

But even discounting those numbers, it appears that the fund had borrowed more than $50 for every dollar of equity capital.

To put more money to work, the fund borrowed about $2 for every dollar that had been entrusted to it to manage.

They argue that by marking the close, top-performing funds in effect have borrowed from future quarters to improve their current performance.

For example, the fund could borrow and sell short a Treasury bond - a position that would gain money as interest rates rose.