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Hedge Fund Makes a Fortune on a $440 Billion Danish Obsession

  • Nykredit hedge fund has delivered 11% on average since 2008
  • Strategy involves spotting mispriced call options on bonds
A spire stands above the old stock exchange building known as the Boersen on the city skyline seen from the central bank headquarters in Copenhagen.
Photographer: Freya Ingrid Morales/Bloomberg
Updated on

The Danes invented handball and they are mad about football. But their real national sport is deciding when to refinance their mortgages.

The $440 billion Danish mortgage bond market is more than 200 years old, and legend has it there’s never been a single default. When Denmark, the country, went bust during the Napoleonic wars, its notoriously efficient mortgage-bond market chugged along without investors taking a hit.