Mortgage hedge funds refine focus after bumper 2012

Finer focus needed

US housing market showing strong recovery

Revived in large part by a rebound in house prices, the mortgage market provided impressive returns for hedge funds in 2012, less than five years after the global financial crisis brought the US economy to its knees. But as the developments that boosted performance last year are priced into the market, those active in this strategy believe a finer focus will be crucial to success in the future.

Funds investing in mortgage-backed securities (MBS) were up 17.47% in 2012 and took in an estimated $4.