A hedge fund that made a killing shorting subprime mortgage securities is lamenting what might have been.

Cupertino, Calif.-based Scion Capital’s subprime investments have returned 400%, giving investors in its $621 million fund overall returns of between 78% and 86% through the first nine months of the year. But Scion manager Michael Burry told investors that withdrawals had forced him to reduce the fund’s subprime exposure by almost two-thirds.

“Allowing some of the wrong sort of investors into the funds in previous years cost us substantial excess return this year, and that is my fault,” Burry wrote in a letter to investors, obtained by MarketWatch.

Now, however, Burry is moving on from the credit crunch that has served him so well. He has reduced his short subprime positions to just $479 million, from $1.7 billion at the beginning of the year. The time has come, Burry wrote, to “reset expectations.”

“The opportunity in 2005 and 2006 to short subprime mortgages was an historic one,” Burry wrote in the letter. “With continued hard work and a bit of luck, we will latch onto another opportunity like the subprime short. But I am not counting on it happening anytime soon.”