According to this article in Bloomberg Markets magazine, the best hedge fund manager was in 2010 was Don Brownstein, founder of Structured Portfolio Management LLC. His flagship fund, Structured Servicing Holdings LP returned 50% in the first 10 months of 2010.
In 2009, the fund returned 135%.
The article stated that the firm will not discuss how exactly the firm made its money in 2010 except this general strategy: “Their longtime strategy is to develop models that predict when homeowners will refinance their mortgages -- a move that reduces interest payments on mortgage bonds. They then buy securities they conclude are underpriced.”
That probably stops 99.9% of individual investors from trying to mimic their doing, as investors can do with tens of Investment Gurus tracked here at GuruFocus.com. We focus on Gurus’ stock portfolios.
The article also discussed a bit about Daniel Loeb, a Guru that we do track. Unfortunately, it talks about how Loeb makes money from mortgage s and gold, instead of stocks, which is more accessible by the less mortals such as us. Here is the relevant portion on Daniel Loeb
Read the Bloomberg Markets magazine article here.
And watch the former Philosophy Professor on his investment strategies:
In 2009, the fund returned 135%.
The article stated that the firm will not discuss how exactly the firm made its money in 2010 except this general strategy: “Their longtime strategy is to develop models that predict when homeowners will refinance their mortgages -- a move that reduces interest payments on mortgage bonds. They then buy securities they conclude are underpriced.”
That probably stops 99.9% of individual investors from trying to mimic their doing, as investors can do with tens of Investment Gurus tracked here at GuruFocus.com. We focus on Gurus’ stock portfolios.
The article also discussed a bit about Daniel Loeb, a Guru that we do track. Unfortunately, it talks about how Loeb makes money from mortgage s and gold, instead of stocks, which is more accessible by the less mortals such as us. Here is the relevant portion on Daniel Loeb
In 2010, you didn’t need to be a specialist to see that there was money to be made in mortgages. Daniel Loeb of Third Point normally invests in stocks and bonds of companies going through mergers and restructurings. He has owned mortgage securities since 2007. In 2009, they helped lift the fund 38.4 percent for the year, Loeb said in a letter to investors dated March 1, 2010.
“Mortgage securities contributed significantly to our returns during the fourth quarter and have also performed strongly so far in 2010,” Loeb wrote.
Re-Remics
As of June, mortgage investments accounted for about one- fifth of Third Point’s assets, according to a letter sent to investors in August. Loeb used securities called re-remics for about half of his mortgage play, according to the letter. Remic is an acronym for “real estate mortgage investment conduit.” It’s a trust, backed by thousands of mortgages, that pays interest.
Remics are divided into tranches according to risk and sold to investors. Each tranche becomes a separate mortgage bond. That makes them cousins of collateralized debt obligations, the bundles of mortgage bonds and other debt whose value plunged in 2007, helping to trigger the larger financial crisis.
Remics also tanked during the credit crisis as the mortgages backing them went into default. Many AAA remics, the least risky ones, lost their rating, and banks and insurers had to put up more capital to cover potential losses. To ease that burden, Wall Street has been repackaging the once-AAA-rated bonds into new trusts that have senior and junior securities.
Loeb is betting on the riskier junior slices, hoping they will pay him a fat yield -- as much as 20 percent, according to the August letter to investors. As the credit crisis eased, those bonds rose in value, contributing to Loeb’s 25 percent return.
Golden Loeb
Loeb also bet big on gold, a popular play for hedge-fund managers in 2010. Gold was the biggest position for George Soros and Paulson in September and the second-biggest position of commodity investor Paul Touradji, according to filings with the SEC. They invested in exchange-traded gold funds, shares of mining companies or both.
Gold appeals to investors worried about the value of paper money, Soros said at a meeting of the Canadian International Council, a nonpartisan group devoted to strengthening Canadian foreign policy, on Nov. 15.
“The big negative is that too many people know this,” Soros said. “There are a lot of hedge funds who are pretty heavily exposed.”
Deficit Scare
Loeb had about 6 percent of Third Point’s assets in bullion in November, the biggest gold bet he’s ever made, according to Third Point investors. He started buying in September, when the metal was trading at $1,250 an ounce, spurred by a U.S. government report saying Washington can’t sustain the deficits it’s been running. Gold was up 11 percent as of Jan. 5 from its close on Sept.
Read the Bloomberg Markets magazine article here.
And watch the former Philosophy Professor on his investment strategies:
