Aussie Hedge Fund Says it Benefited From Exposure to U.S. Sub-prime Mortgages
From Staff Reports
Not everyone’s a loser in the U.S. sub-prime saga.
HFA Holdings Ltd. (ASX: HFA), an Australian hedge-fund manager that manages more than $3 billion, said it anticipated the U.S. sub-prime mortgage crisis two years ago, a prescience that enabled its funds to reap the benefits of the credit crisis that’s even now roiling the global capital markets, Bloomberg News reported early today.
The Sydney-based HFA saw its shares leap 17% on Australian exchanges after the hedge-fund manager said it essentially “shorted” sub-prime securities – essentially borrowing and selling the securities it didn’t actually own at high prices, betting it could replace the shares at a much lower price after the securities cratered. The difference between what it took in by selling the securities and what it paid to replace them is its profit on the transaction, or series of transactions.
"Our investors will be well rewarded by their allocations to HFA’s absolute return funds over the coming 12 months,” HFA said in a company statement to Australia’s stock exchange.
The company said its investments in collateralized debt obligations and residential mortgage backed securities resulted in a net short position.
HFA Managing Director Paul Jensen last month told the Australian publication TheAge.com that HFA Holding’s Australian funds didn’t have significant exposure to the U.S. sub-prime mortgage market. Jensen told the newspaper that the credit markets made up a very small proportion of HFA’s exposure to global hedge funds.
“As I said before, the exposure of the (HFA Diversified) fund is across multiple strategies, long/short, event driven, and as I did say, with no exposure to credit," Jensen told Sky News. "With … the last six months, the sub-prime issue has arisen in the U.S. (market) … from our perspective, we have been well positioned for that and have made money over the last six months.”
