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Alternative Market Briefing

Hedge funds are betting on Freddie and Fannie’s recovery

Thursday, May 16, 2013

From Komfie Manalo, Opalesque Asia – Hedge funds are betting on the recovery of government-controlled enterprises (GSEs), particularly Freddie Mac and Fannie Mae, reports The Wall Street Journal.

Ironically, these are the same hedge funds which made hundreds of millions in profits when the housing market crashed in 2008, including Freddie and Fannie.

The report identifies hedge funds Paulson & Co. and Perry Capital LLC as among those which have been buying preferred stocks in Freddie and Fannie. Indeed, the two enterprises are returning to profitability as the U.S. housing industry is showing good signs of recovery, and may eventually make payments to preferred shareholders. More importantly, hedge funds are looking for a higher payout this time as they hope that the Feds raises more capital for Freddie and Fannie.

An earlier report by Fierce Finance said that Paulson was looking for big profits on Freddie and Fannie and had been loading up on ultra-cheap preferred shares, betting that firms may someday rise from the ashes by paying off their debts to taxpayers and becoming fully rehabilitated private entities.


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