ABS East: Is the RMBS trade over?
October 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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