Only a year ago, Andrew Berger occupied an enviable position at the peak of his career. The seasoned investor, known for his precision and boldness in mortgage markets, helmed the mortgage-trading division at LMR Partners—a global hedge fund managing an impressive $12.8 billion in assets. Under Berger’s leadership, his team achieved extraordinary success in 2024, reportedly generating close to $250 million in profits, according to three individuals with direct knowledge of the firm’s internal performance. Those familiar with the situation described his unit’s results as among the most lucrative within LMR’s diverse strategies, establishing Berger as one of the firm’s most celebrated talents and a rising star across the broader hedge fund industry.
This ascent, however, has come to an abrupt end. Sources close to the matter now confirm that Berger has departed LMR following steep and unexpected losses sustained in September. The downturn was tied to an aggressive investment in mortgage-backed securities, a position that turned sharply against him in a matter of weeks. The same insiders, who requested anonymity because the information remains private and market-sensitive, explained that the trade’s reversal was severe enough to erase gains accrued earlier in the year and ultimately to precipitate his exit.
The misjudged bet did more than tarnish one trader’s reputation—it had a noticeable impact on the performance of LMR itself. The firm logged a 0.9% decline for September, representing a rare monthly setback for a multistrategy fund of its size and stature. Among its peers, LMR stood out as the sole major player to register losses that month, a particularly striking outcome given that these types of funds are meticulously designed to deliver consistent, low-volatility returns through broad diversification. Multistrategy vehicles typically balance exposures across equities, fixed income, arbitrage, and credit, aiming to smooth out the turbulence of any one market. That an internal mortgage position could meaningfully dent LMR’s overall returns underscores both the magnitude of Berger’s leveraged trade and the fragility that can accompany even sophisticated risk dispersion frameworks.
An official spokesperson for LMR declined to offer any comment on either the loss or Berger’s departure, maintaining the firm’s customary discretion regarding personnel changes and trading performance. Berger himself has not responded to multiple requests for comment, leaving observers to speculate quietly about the circumstances that led to the unraveling of his once-promising trajectory.
Berger’s prominence in the industry had risen quickly. Having joined LMR in 2022 after a tenure at Credit Suisse, he brought with him deep expertise in securitized products—a complex corner of fixed-income markets that demands both technical fluency and a high tolerance for risk. Recruiters and peers alike described him as one of the most talked-about names in residential and structured-credit trading over the last year, buoyed by his exceptional 2024 performance and the strong momentum he carried into the start of 2025. Within trading circles, his name had become shorthand for the kind of modern quantitative credit specialist capable of extracting returns from nuanced shifts in mortgage spreads and prepayment dynamics.
His chosen approach was unapologetically capital-intensive and heavily leveraged, centered on residential mortgage-backed securities (MBS). This strategy, which can magnify both profits and losses, ultimately turned against him in September. According to three people familiar with his trades, the reversal effectively erased more than $100 million in year-to-date profits, negating months of earlier success. The specific catalyst behind the downturn remains uncertain. What is clear, however, is that the market for mortgages became unusually volatile following monetary policy developments in mid-September. Mortgage rates—whose behavior often diverges from that of U.S. Treasury yields—initially dipped in anticipation of the Federal Reserve’s September 17 interest rate cut, only to surge abruptly in its aftermath. The whiplash in rates likely destabilized valuations across a range of mortgage securities, particularly those employing leverage and complex hedging structures.
To understand the mechanics, one must consider the nature of an MBS itself: a bond-like instrument composed of thousands of individual home loans. Its value fluctuates not only with prevailing interest rates but also with borrower actions—such as refinancing or prepaying their mortgages—each of which changes the timing and magnitude of cash flows to investors. When rates fall, homeowners tend to refinance more rapidly, shortening the expected life of the securities; when rates rise suddenly, the opposite occurs. Thus, even modest rate adjustments can cause disproportionate valuation swings, especially in portfolios constructed with borrowed capital. In Berger’s case, such seemingly modest movements may have cascaded into significant, amplified losses.
For now, the full explanation remains elusive. Industry watchers continue to dissect what went wrong, while insiders note that in high-leverage mortgage trades, minute shifts in market structure or liquidity can prove disastrous. The episode serves as a vivid reminder of both the potential and the perils inherent in modern fixed-income trading: that triumph and setback often lie precariously close together, even for the most accomplished market players.
Sourse: https://www.businessinsider.com/hedge-fund-star-andrew-berger-leaves-lmr-mbs-trade-backfire-2025-10
