Hedge Funds

Highland readies short mortgage strategy


Highland Financial Holdings in New York is planning to launch a short-biased hedge fund with an unusual twist on what the firm sees as a mortgage bubble.

The Mortgage Short Fund, which will begin trading on January 2, will use short-term income from long bets on stable real estate investments as a hedge against carryover costs from short positions.

As the firm sees it, income from the long plays will offset upfront margin costs associated with short plays on higher risk asset-backed securities. Highland expects these securities to default when the underlying mortgages reset at higher interest rates over the