In 2002, Brian Taylor left a successful Minnetonka hedge fund and retreated to his family cabin in central Minnesota.

He had no plans to retire. Pine River Capital Management, named for the lake-country town, was started outside the Twin Cities because Taylor needed to honor a one-year, 100-mile noncompete agreement with EBF & Associates, where he’d worked for 14 years.

Taylor became his firm’s first investor with $350,000 from his IRA account.

Today, Pine River, with assets of $14.3 billion and nearly 400 employees (including 175 in Minnesota), is the state’s largest hedge fund. It operates from several financial centers including the Twin Cities, London, New York, San Francisco, Hong Kong and Austin, Texas. It also has been among the industry’s best performers, according to the analysts who track the black-box world of private investment funds for institutional investors and affluent individuals.

“We generally don’t try to predict the direction of markets,” Taylor, 48, said recently in his first Star Tribune interview. “We look at relative valuation … for things that are mispriced. We’re not trying to time markets. The goal is to make money whether markets are up or down.”

Pine River, owned by Taylor and 15 other partners, witnessed a $2 billion “profit” across its various funds last year, according to Institutional Investor’s Alpha spring publication on hedge fund performance. A Pine River spokesman said the $2 billion roughly represented the unrealized increase in value, not cash into partner pockets.

In May, Barron’s said Pine River operated two of the country’s best-performing hedge portfolios over the past three years. They are the Pine River Fixed Income (23 percent compounded annually) and the Pine River Global Multi-Strategy Relative Value (13.5 percent compounded annually).

Steve Kuhn, the head of fixed-income trading who joined Pine River in 2008 from Goldman Sachs, has become one of the industry’s most celebrated mortgage bond traders. His big bet? That deeply discounted mortgage-backed securities, from junk bonds to government-insured, would rebound from the depths of the recession, thanks to the federal rescue of the financial system and the Federal Reserve money pump that’s helped keep interest rates at record lows and brought huge profits to the buyers of those discounted bonds.

“Pine River … has had so much success with its mortgage strategy … that outsize returns have become an odd sort of image problem — the kind most hedge fund managers would die for,” Institutional Investor said. “Pine River probably has to spend as much time moderating expectations of future profits as it does explaining its methods and operations.”

Of course, past performance is no guarantee of future returns, as investment outfits note in the fine print. But Pine River’s reputation for the great mortgage play has helped take its act public.

In the fall of 2009, Pine River launched a publicly traded REIT, or real estate investment trust, called Two Harbors that invests in mortgage-backed securities. Its value ran from about $8.50 per share to nearly $13 in May, before backing off to under $11 recently amid news of the strengthening economy and the specter of higher interest rates.

Last December, Pine River launched another publicly traded investment trust, Silver Bay, that buys, repairs, rents and eventually sells houses in more than a dozen of the country’s most damaged residential real estate markets. David Miller, a former U.S. Treasury official who helped manage the federal bailout, was hired on to run Silver Bay.

“We have a process and structure to make money in all market environments,” Taylor said.

Pine River has spent millions reinvesting profits in people and analytical technology. Most hedge fund investors, whether pension funds or millionaires, put only a small percentage of their assets in such outfits to try to make money in ways usually not available through retail stock-and-bond funds. Taylor said his risk department can show clients what happens to their various portfolios “if equity markets fall 30 percent tomorrow.”

A lean athlete who competes in marathons and triathlons, Taylor spends much of his free time outdoors with his three sons, whether running around Wayzata or skiing in the Rocky Mountains.

Taylor grew up in suburban Chicago, earned an undergraduate degree in accounting, and an MBA in finance with a specialization in statistics from the University of Chicago. He joined the financial markets unit of Cargill in 1988, but soon left with several colleagues to start EBF.

When he split to do his own thing, Taylor didn’t endear himself to EBF chief executive Mike Frey, who still runs the smaller EBF. Several former EBF executives joined Taylor at Pine River.

After several years in downtown Minneapolis, Taylor moved his firm into Minnetonka’s 601 Carlson Parkway. It’s home to EBF and the local hub for several big financial firms in the affluent western suburbs. Frey and other competitors who know Taylor declined to comment last week on Pine River’s growth and success.

The move to the five-star quarters came just in time for the 2008-09 financial crisis. Taylor said he invested millions of his own money into Pine River to stem losses caused by panicked investors who wanted out of Pine River funds when the economy was crashing and cash was king.

Pine River lost money that year. But Taylor said he was proud to meet 100 percent of customer demands promptly, attributing that to investments that were mostly in liquid, albeit beaten down, public markets.

“Most people would prefer not to go through 2008,” Taylor said.

“The goal is to generate profits.”

In 2009, Pine River doubled in size. And the profits have been flowing since.