Star Trader's Departure From LMR Partners After Investment Loss

Andrew Berger, a key player at the $12.8 billion LMR Partners hedge fund, stepped down following a significant loss tied to mortgage-backed securities. Known for his expertise in residential mortgage-backed securities (MBS), Berger employed a strategy that involved high leverage, ultimately leading to the firm's unique 0.9% loss in September among major multistrategy funds.

In 2024, Berger's team achieved approximately $250 million in gains, marking him as a prominent figure at LMR Partners. However, recent trades linked to mortgage-backed securities resulted in substantial losses, spurring his exit, according to sources who spoke on condition of anonymity.

LMR Partners found itself alone among significant multistrategy funds to see a downturn last month, with such funds typically spreading risk across various markets to ensure consistent, low-volatility returns. Company representatives refrained from commenting on the situation, and Berger also did not provide a statement.

Berger joined LMR Partners after leaving Credit Suisse in 2022. His work in securitized-products trading made him renowned, particularly following an impressive 2024 and a promising start to 2025, as noted by industry recruiters.

His method, focusing on intensive capital investments in highly leveraged residential MBS, faced a significant setback last month. This strategy's failure obliterated potential gains for the current year, with losses estimated to exceed $100 million.

The precise cause of the trade's collapse remains undetermined. Mortgage rates, which do not directly follow US Treasury yield trends, fell before an interest rate cut by the Federal Reserve on September 17th, only to spike abruptly afterward.

Due to the nature of mortgage-backed securities, which are composed of various home loans, changes in homeowner actions—such as refinancing or early payments when interest rates fluctuate—can swiftly impact the valuation of these securities. When leveraged, even minor rate changes can lead to disproportionately large losses.