One year ago
»» Investors were wondering whether hugely
profitable bets on residential mortgage-backed securities would
peter out in the following year. The Absolute Return Mortgage
Backed Securities Index was up by an annualized return of
12.52% from the start of 2009 through yearend 2012, and capped
off that final year with a median gain of 15.15%. The best performing MBS funds were up more than
The strategy is still profitable, but it has been
far from a free ride lately, and its overall
gains have been muted in comparison with last year. The MBS index is up 5.54% through September, slightly
ahead of the Composite return of 5.08%.
Five years ago
»» Shocked and inspired by the
financial crisis, hedge fund managers produced an unusually
philosophical crop of investor letters. In
Postcards from the (h)edge, Absolute Return pulled
together excerpts from some of the most apocalyptic missives.
Kyle Bass: "...We think we will see 10-12%
unemployment, a 4-5% decline in GDP, and the equity markets
could drop at least 70% from peak to trough."
David Einhorn: "In hindsight, our suggestion from
last quarter's letter to go to cash and go to the beach would
have been the better option."