Carl Icahn and other bears have shorted the basket of mortgage securities tied to CMBX 6 by purchasing insurance products, known as credit default swaps, from sellers, which include AllianceBernstein and others.This story is available exclusively on Business Insider Prime.The senior research analyst who helped defend AllianceBernstein's $4 billion bet on an index tied to a pool of increasingly-risky mortgage securities is leaving the firm.
The index has been the focus of one of the biggest shorts on Wall Street, a $5 billion bet against the mortgage securities by billionaire Carl Icahn. MP Securitized Credit Partners told Business Insider it reaped 120% returns on about $50 million of swaps purchased in February in a special equity vehicle that's separate from its main fund.Months before the pandemic hit the US, investors were placing bets against the future of shopping malls, while a major asset manager was positioning billions of dollars in mutual funds it controls on the other side of the wager.
The analyst's exit comes as a hedge fund reported major returns shorting the index, which reflects the risk of default for a basket of mortgage securities that have exposure to the nation's struggling retail market. The fund's win strikes a blow to his commentary, and could signal that AllianceBernstein's long position against the index could lead to steep losses ahead for the $500 billion asset management firm.
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