ABS East: Is the RMBS trade over?
By Lawrence Delevingne
Thu Oct 25, 2012
Attendees wonder whether the best performing hedge fund strategy can continue.
It's been a blowout year for mortgage backed
securities. Hedge funds investing in them have led the
industry, with such firms as Axonic Capital, Metacapital
Management, Pine River Capital Management and Cerberus Capital
Management registering industry leading double digit returns.
The median manager in the strategy is up 11.42% for the year
through September, according to the Absolute Return MBS Index,
compared with a 4.96% composite return across strategies.
Investors have noticed and money has poured into the strategy.
But is the trade now too crowded? Are the best returns,
particularly in subprime RMBS, over? The answer to the question
was much discussed at the ABS East conference in Miami last
week. The majority view appeared to be that the best returns
are indeed past, but solid gains are still possible given
improvements in the housing market. "Unless the housing market
substantially outperforms everyone's expectations in 2013, RMBS
managers will not...
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