The meltdown in June of two subprime mortgage funds at Bear Stearns and the ensuing chaos in the mortgage markets made for a rough July. The Absolute Return Mortgage-Backed Securities Index was nearly flat for the month to total 3.57% for the year. The median's 0.02% July gain is the index's worst return since July 2003, though still better than that of the broader hedge fund market. The Absolute Return Composite Index lost 0.20% for the month.
With rapidly rising mortgage default rates, prices for structured mortgage debt continued to drop, wreaking havoc on unhedged and leveraged portfolios. Some