Greg Lippmann who became famous for betting against the subprime mortgage

Greg Lippmann, the former trader at Deutsche Bank AG, which became famous for betting against the subprime mortgage securities-focused buying a hedge fund debt in its first month.

LibreMax Capital LLC fund gained about 1.67 percent in October, and which invested 44.4 percent of their portfolio in bonds backed by subprime loans to borrowers with the worst credit, according to a letter to investors obtained by News. Hedge funds returned 1.5 percent on average last month.

Lippmann, 41, started the firm based in New York to Fred Brettschneider, the former head of global markets at Deutsche Bank Americas, after the German lender started this year. Lippmann team nearly $ 2 billion for the bank in 2007 betting against risky debt through credit default swaps, as homeowner delinquencies soared, according to "The largest ever Trade ( Broadway Books, 2009) by Greg Zuckerman.

"Returns were boosted by the rally in the mortgage market in general as well as strong commercial gains during the month," it said in the letter.

John Curran, director of marketing for LibreMax, declined comment. Lippmann is the company's accounting chief investment.

LibreMax Partners LP bought and sold 9 82 titles last month, according to the letter. "Our investment team had a first active month," the company said.

Foreclosure Problems

The fund found "attractive investment opportunities" sliced junior ranking of the largest subprime securitization and repackaging securities junior pieces of prime mortgage loans and bonds whose principal is never paid, according to the letter.

In addition to subprime mortgage debt, the company also has 13.9 percent of the fund's portfolio for other values of mortgage-backed securities without government, according to the letter.

LibreMax is to dismiss concerns that problems of exclusion created by the loan servicers in September to recognize that they used false affidavits in court, damages bondholders by increasing the time it takes to clear soured debt.

Investors in residential mortgage-backed securities, or RMBS, does not change what they pay, the company said.

"While the press about the risks of exclusion has been frequent, the RMBS market has largely shrugged off this news," the company said. "We agree with this sentiment and believe that current prices, in general terms, taking into account the possibility of extended periods of foreclosure."

Falcone, Paulson

Lippmann was one of the traders on Wall Street who helped create the standard default swap contracts, which made it easier for John Paulson hedge funds, including Paulson & Co., Philip Falcone, of Harbinger Capital Partners and Hayman Advisors LP to bet against the housing.

In 2006 and 2007, Lippmann encouraged money managers to make bets and run their operations, according to Zuckerman's book and Michael Lewis "The Short Grande" (Norton / Allen Lane), which was also presented. Paulson and Hayman, led by Kyle Bass, are among the investors later began buying mortgage bonds at a price equal to bottom.

Markit ABX index of credit-default swaps tied to 20 subprime mortgage bonds rated AAA when created in the second half of 2006 has risen almost 33 percent this year, according to administrator Markit Group Ltd. The overall increase indicates that there is less pessimism about the value of risky debt.

Index levels

The index levels are generally similar to the prices being paid by the underlying securities for pennies on the dollar. The index rose to 56.13 hours after falling as low as 28.46 in April 2009. It lost 1 percent last month after rising to nearly 60, the highest since October 2008, during the period.

Prices of securities backed by higher fixed rate mortgages called Alt-A gained 1 cent last month to about 79 cents, according to Barclays Capital. Debt related to loans to borrowers who often did not document their income or do not plan to live in other advanced properties percent last week after finishing last year at about 72 cents. Holders receive interest payments.

Seer Capital Management LP, the hedge fund run by Philip Weingord, is also buying high-risk mortgage securities, said in an interview Weingord 30 September. He oversaw Lippmann's Deutsche Bank, while the trader did bet against subprime mortgages. Weingord left Deutsche Bank in 2008 and was replaced by Brettschneider.

Partners LibreMax recent months, also bought "highly experienced" securities linked to home loans, manufactured, and the category of debt made up 20.7 percent of the investments, according to the letter. He also bought bonds backed by private-student loans, credit card accounts high risk and high returns, business loans, high risk, known as collateralized loan obligations.

The fund lost money last month on the cover of the participation of high-yield corporate debt, according to the letter.