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Fund Times

MBIA Investment a Big Win for Fairholme's Berkowitz

A promotion at Heartland Advisors, former Fidelity Magellan PM Jeffrey Vinik to shutter his hedge fund, and Southeastern readies another proxy fight.

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Monday's announcement of a legal settlement between mortgage insurer MBIA (MBI) and  Bank of America (BAC) was great news for MBIA investors, who saw the stock surge 45% on Monday.

It also was great news for clients of manager Bruce Berkowitz of Fairholme Capital Management, who has been a large holder of MBIA. Berkowitz, who was named Morningstar's domestic-equity Fund Manager of the Decade in 2010, has a small position in MBIA in Silver-rated  Fairholme (FAIRX) and a significant position in MBIA's bonds in Bronze-rated  Fairholme Focused Income (FOCIX). According to Morningstar's data, MBIA accounted for fully 42.7% of Fairholme Focused Income's assets as of Feb. 28, 2013. ( Sears (SHLD) bonds were 17%, short-term Treasuries and a money market position were 40%, and  AIG (AIG) represented a minuscule position, so in effect the fund holds bonds issued by two companies plus some cash.) 

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Robert Goldsborough does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.