Market forces—and not an investment adviser—were to blame for the loss of millions that two Australian hedge funds invested in risky residential mortgage-backed securities (RMBS) prior to the 2007-08 market collapse, a New York state appeals court ruled, tossing a lawsuit seeking damages for fraud.
In May 2007, the hedge funds, grouped together collectively as Basis, purchased more than $27 million in notes in an investment vehicle called Dutch Hill, in which below-investment-grade RMBS tranches were paired with higher-rated tranches.
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