Hedge Funds Bet Banks Will Pay Up In Mortage-Backed Bond Suits

Jan 29 2014 | 11:36am ET

Banks have paid out tens of billions of dollars in recent years to settle allegations—both from regulators and investors—stemming from the subprime mortgage crisis. Hedge funds are betting that those deals are just the tip of the iceberg.

Hedge funds are behind one of the biggest bets on the market right now: That banks will be forced to pay out even more to settle even tougher lawsuits. And the hedge funds themselves are often behind those lawsuits, The New York Times reports.

Hedge funds have been buying up mortgage-backed bonds that have been the target of investor lawsuits. Those bonds could soar in price if banks lose or settle those lawsuits—or if investors think they'll lose or settle. And there are as many as $200 billion worth of them out there, according to Nomura.


In Depth

Q&A: Decathlon Capital On Revenue-Based Alternative Lending

Oct 30 2017 | 3:49pm ET

The explosion in private credit activity since the end of the financial crisis is...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Saxby: Not All EBITDA Is Created Equal

Nov 30 2017 | 8:02pm ET

Record levels of dry powder are driving competition among private equity firms to...