Chidem Kurdas
With both the European Central Bank and the Federal Reserve promising low rates into the foreseeable future, mortgage securities and other structured debt remain a potential source of higher return . With that in mind, several large investors have allocated to certain fixed income managers that have the structured debt expertise to make money in a tricky market.
Among the beneficiaries is Tilden Park Capital, which was started in 2009 by Joshua Birnbaum. Previously he was a managing director at Goldman Sachs, at the mortgage department. He testified at a Congressional hearing in 2010 that he predicted the subprime collapse and accumulated short positions via credit default swaps—sounds similar to the bet that made John Paulson a fortune. Mr. Birnbaum said that in 2007 the bank ordered the short positions reduced in order to limit risk, despite his argument that the market would continue to slide and keeping the shorts was the more profitable strategy.
Even so, his trading desk made $3.7 billion and Mr. Birnbaum received $10 million, according to William Cohan’s book on Goldman Sachs.
In 2009 it was reported that he was launching Tilden Park with $1 billion. The firm does not appear to have that much under management but this year it received more capital, for instance with a new allocation from Morgan Stanley. Structured debt is a significant part of Tilden Park’s strategy.
Tags: Goldman Sachs, John Paulson, Morgan Stanley, Tilden Park Capital, William Cohan
HedgeFundSmarts 
October 8, 2012 at 12:25 pm
[…] says that while BB-rated bonds appear to be expensive, bank loans offer significant value. Another source of higher return: mortgage securities and other structured […]