Farsighted players predicted the current housing
malaise and are reaping the benefits.
By Carolyn Sargent
Last August, when friends and fellow hedge fund managers Kyle
Bass and Mark Hart began marketing a special-purpose fund
dedicated to shorting the market for high-risk mortgages, it
required lots of explanation. Housing prices were still on an
upswing, defaults were only starting to pick up and the
strategy itself was a bit exotic.
And yet, says Hart, the founder of Fort Worth, Texas-based
Corriente Advisors, "We saw the risk/reward tradeoff as
extremely compelling because the cost of insurance was as low
as it had ever been, and the fundamentals were clearly
The pair's Subprime Credit Strategies portfolio - managed
jointly by Hart and Bass of Dallas-based Hayman Capital
Partners - began trading in mid-September with a bit more than
$100 million. While the market barely moved in last year's
fourth quarter, by...