Fortress Mortgage Fund Battered In First Three Months

Jul 21 2008 | 9:58am ET

A new Fortress Investment Group hedge fund betting on a rebound in mortgage-backed securities has fallen by about 30% in its first three months of trading.

The Fortress Mortgage Opportunities Fund is reeling from the continuing downward spiral in the mortgage market, The Wall Street Journal reports. The fund invests only in the highest-rated mortgage-backed bonds, and employs only three-times leverage.

Still, despite the dismal start, the Mortgage Opportunities Fund is not in danger of collapse, thanks both to its modest leverage and its three-year lockup period. Fortress raised some $560 million for the fund, and in June invested another $200 million.

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