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A Short Bet Against Malls Fuels 48% Gain for One Long-Time Bear

  • Former FrontPoint fund buys credit-default swaps on CMBX index
  • Apollo, Icahn have also made bearish bets on America’s malls
The Diagonal Plaza shopping mall stands in Boulder, Colorado, U.S..

The Diagonal Plaza shopping mall stands in Boulder, Colorado, U.S..

Photographer: Rachel Woolf/Bloomberg

A hedge fund’s long-held bearish bet on the demise of America’s malls sparked its biggest gains ever last month as the Covid-19 pandemic shut down much of the U.S. economy, threatening commercial landlords.

MP Securitized Credit Partners returned a net 47.9% in March in its $162 million flagship vehicle at a time when many other firms that bet on structured credit have nursed big losses. Its wagers against the derivatives index known as CMBX 6, which is heavily exposed to mall debt, helped to offset declines on the fund’s holdings of commercial mortgage-backed securities, according to an investor letter seen by Bloomberg.