Wednesday, 30 July 2014
Last updated 11 hours ago
Jul 30 2010 | 1:02pm ET
Hedge fund Metacapital Management soared 28% in the first half, with half of that return coming during the second quarter, the worst for the hedge fund industry in a decade.
The $150 million New York-based firm profited from government-backed debt in the first six months of the year, founder Deepak Narula wrote to investors. The firm, which debuted in 2008 with Narula, a former mortgage-bond trader at Lehman Brothers, at the helm, posted an eye-popping 125% return last year, Bloomberg News reports.
Now, however, the firm is girding itself for a potential “one-time amnesty” term change by Fannie Mae and Freddie Mac, which could save homeowners a whopping $50 billion a year through refinancing. The “only losers” in such a scenario “are the security holders of mortgages that are paying above-market interest rates,” Narula wrote.
To protect itself from such a refinancing wave, Narula said that Metacapital was buying lower-coupon mortgage bonds to hedge its bets on the inverse interest-only tranches of collateralized mortgage obligations that earned the firm its big returns in the second quarter.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…