From a Bloomberg slideshow on "best-performing hedge funds managing $1 billion or more": "Three of the top five funds in the Bloomberg Markets list invested in mortgage securities... Betting on mortgage securities outpaced every other strategy, with an average return of 20.2 percent, against an industry average of just 1.3 percent, according to data compiled by Bloomberg."
This is the stuff that a few years ago the press and the government were describing as "toxic." I guess it may have been toxic if you originally overpaid for it or if you needed to liquidate it immediately in an environment in which the press and the government were describing it as toxic. But it'd be interesting to know, if these hedge funds invested directly in the securities rather than in some kind of derivative, who the sellers were. That is, who made the mistake of selling this stuff to these hedge funds a year or so ago for 20% less than it was going to be worth? Was it highly regulated banks who were being told by regulators and journalists that they needed to clear these "toxic" mortgage securities off their balance sheets?