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Ali Lumsden’s East Lodge Capital Plunges 26% In March As Mortgage Market Implodes

Courtesy of ZeroHedge View original post here.

Ali Lumsden's East Lodge Capital isn't quite having the same success it did the last time the mortgage bond market melted down.

Lumsden, famous for gaining 73% when the mortgage bond market went belly up last time, saw 26% declines in March in its main hedge fund and a 16% in another of its funds, according to Bloomberg

The fund specializes in securitized credit, which has suffered as the global economy has ground to a halt over the last 2 months. The good news for Lumsden is that East Lodge may have a tailwind in Central Bank policy, which is now apparently to bail out and backstop all bond markets, of all sizes, secured or unsecured. 

Lumsden, who has worked in structured credit for 30 years, formerly averaged 28% annually while working at Michael Hintze's CQS, an asset back securities fund, from 2006 to 2012.

In 2008, he made his score betting big against subprime mortgages and the banks that held them on their respective balance sheets. CQS, where Lumsden no longer works, was also down in March – to the tune of 40%. 

East Lodge manages $1.9 billion and invests primarily in residential and commercial mortgage backed securities and collateralized loan obligations. 

The mortgage market appears to be in complete shambles. We wrote just days ago that JP Morgan will be raising borrowing standards for most new home loans as the bank "moves to mitigate lending risk stemming from the novel coronavirus disruption."

Days prior to that, we reported that JPMorgan had quietly halted all non-Paycheck Protection Program based loan issuances for the foreseeable future. We predicted the reason why JPMorgan would "temporarily suspend" all non-government backstopped loans such as PPP, is because the bank expects a default tsunami to hit, coupled with a full-blown depression that wipes out the value of assets pledged to collateralize the loans.

And if that's the case, we can't say we disagree.


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