Both commercial and residential mortgage-backed securities will be great investments in 2014 as the Fed starts tapering and long-term interest rates rise, says a top hedge fund manager.
Deepak Narula, founder and head of top-performing hedge fund Metacapital Management, says his firm is betting commercial mortgage-backed securities will be top performers in 2014, he told CNBC's "Halftime Report" on Monday.
"If you look at CMBS spreads, they are a lot higher than what you can get in the high-yield market, they are a lot higher than what you can get in the residential mortgage-backed securities markets," he said. "And so it is a sector that we think will do better—but in more credit-risky securities, not necessarily the AAA securities."
As for what will happen once the Fed does start tapering, "it's anybody's guess," Narula said.