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: Fund Administration Comes To The Cloud

Jul 14 2017 | 7:23pm ET

The fund administration sector has been steadily implementing new technology, such...

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

Rastegar: PE Real Estate Gains Momentum as Uncertainty Rises

Jul 21 2017 | 6:04pm ET

The steady march of equity markets and fundamental shift in the direction of Fed...

 

From the current issue of