Global Pensions- Many hedge funds have been able to generate profits as a result of the decline in the sub-prime mortgages space, according to Hennessee Group LLC, an adviser to hedge fundinvestors.
While acknowledging that some hedge funds focused on mortgage backed securities had suffered well publicised losses, Hennessee Group LLC said many hedge portfolios have benefited from the collapse insub-prime mortgages via their short exposure to mortgage lenders and sub-prime mortgage backed securities and indices.
The firm explained that while some have focused on shorting mortgage lenders and buying credit default swaps (CDS) on specific mortgage backed bonds, others have elected to purchase CDS on indices ofthese securities (the ABX series) with most focused on those securities issued in 2006 under more relaxed lending standards.
Hennessee Group LLC said: “While many recent news stories have publicised hedge fund failures related to the sub-prime collapse, the reality of the situation is that many hedge funds were expectingsuch an event and were able to profit from the decline.â€Â
A total of US$85bn in new institutional assets will be allocated into hedge funds in the next two years, according to a report by Private Equity Intelligence (Prequin).
