Betting on the bottom of the mortgage mess is proving to be a tough bet, even for the smart money. According to a published report Monday morning, a fund set up by the private-equity and hedge-fund giant Fortress Investment Group LLC (FIG) to take advantage of turmoil in the mortgage bond market has tanked so far, to the tune of 30 percent in just three months after its formation. A report in the Wall Street Journal looks at the Fortress Mortgage Opportunities Fund, suggesting that performance has fallen as even the top-rated tranches of non-prime mortgage deals have suffered fits in a market that as of yet shows no signs of a rebound. The pursuit of a AAA-rated investment strategy has proven no fail-safe, either, as major credit rating agencies have been taking the axe to former investment-grade ratings amid continuing declines in collateral performance. The Journal story doesn’t cite where its information was obtained, and calls to Fortress for comment were not returned when this story was published. According to the Journal, the fund has locked investors in for three years — to prevent mass withdrawals that have crippled others like it — and has kept leverage to a low 3x level, having also learned the lesson that high leverage in a volatile market is a great way to watch a fund implode (a lesson, no doubt, taught by the failures of Peloton Partners LLP and Carlyle Capital Corp. earlier this year). The question at this point is whether Fortress was in too early to make a profit with its current fund, or if the fund stands to make back its losses and then some as a bottom does eventually emerge in the RMBS market. Whether we’re there yet or not is absolutely anyone’s guess, but HW’s sources suggest they’re still largely sitting on the sidelines of the market. For now. Disclosure: The author held no positions in FIG when this story was written, although indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.