Brownstein's Mortgage Metaphysics Drives 50% Gain in Top Global Hedge Fund

Brownstein and William Mok, Structured Portfolio’s director of portfolio management, won’t say exactly how they made their 2010 killing. Their longtime strategy is to develop models that predict when homeowners will refinance their mortgages -- a move that reduces interest payments on mortgage bonds. They then buy securities they conclude are underpriced.

Many homeowners have been unable to take advantage of tumbling rates to refinance their mortgages because their houses are worth less than they owe on their loans. Investors that bet against a refinancing boom have profited.