1,000% Subprime Short Seller Off To The Races

Jan 24 2008 | 2:00am ET

Happy New Year, indeed: Three weeks into 2008 and a hedge fund manager that returned over 1,000% last year betting against the subprime market is already racking up sizable gains.

Lahde Capital’s U.S. Residential Real Estate Hedge V—classes A and B—Commercial Real Estate Hedge and Short Credit Fund are up 17%, 23%, 61% and 15%, respectively through Jan 18.

And founder Andrew Lahde sees further hemorrhaging in the residential, commercial and credit markets, as evidenced by Standard and Poor’s increasing its estimate of cumulative losses for subprime mortgage pools originated in 2006 from 14% to 19%.

“Millions are in trouble in the subprime world, but millions more are facing rising monthly payments, who are classified as Alt-A or prime borrowers,” wrote Lahde, in his latest monthly missive to investors. “When it is all said and done, everyone will know someone who has gone through foreclosure. Our Residential Fund continues to operate and will likely continue to experience gains for many months before we liquidate it.”

Lahde also noted further opportunities for the Commercial Real Estate funds on the back of bad news stemming from property developers who have had a tough time refinancing their loans.

Going forward, Lahde said the housing market has “zero chance” of a broad-based recovery in 2008 and commercial real estate-, auto- and credit card- backed debt will be the “subprime” of 2008 with commercial real estate valuations falling for the next two to five years.

Modesty aside, Lahde also predicted at least one of his funds “will take a top ten spot in the universe of hedge funds, if not the top spot (again).”


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