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From Kirsten Bischoff, Opalesque New York:

Mortgage arbitrage funds may have had a slow month in December, but with 24% gains for the year they finished out at the top of the performance rankings, according to data compiled by Bloomberg (related).

A New York-based fixed income market-neutral hedge fund called the Midway Market Neutral Fund ended the year one of the top ranked funds in that strategy, returning +53.47% - and +3.25% (est.) in December.

According to communication with investors, John Morris, Managing Director at The Midway Group, attributed part of the fund’s success to a favorable environment and digging “way beyond headline noise in chaotic markets to identify mispriced cash flows”.

“Midway has a ten-year track record of doing this,” he explained in a recent press release. “We seek to find cheap cash flows and to buy them even cheaper while maintaining a disciplined risk management approach to preserve market neutrality. This strategy has produced annualized net returns of 20% over ten years with a Sharpe Ratio in excess of 1.7 and with little correlation to broader markets, and or, to other asset classes.”

Many hedge fund strategies broadly outperformed equity markets in 2010, ......................

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