Pacific Investment Management Co., the mega bond fund in Newport Beach, plans to launch a $2 billion fund to invest in distressed debt, reports the Wall Street Journal online. Here’s more:
Pimco Distressed Mortgage Fund will invest in a variety of assets, including mortgage-backed securities, asset-backed securities and collateralized debt obligations, according to a Pimco document. A spokesman at Pimco, a Newport Beach, Calif., money-management firm with $693 billion in assets, declined to comment.
Pimco’s marketing of the new distressed-debt fund follows fast on the heels of a similar offering from rival TCW Group, a Los Angles-based money-management firm with $161 billion in assets that is also known for bond management. TCW closed to new investors its $1.56 billion fund late last month. Jeffrey Gundlach, the firm’s chief investment officer, said the fund has already started making investments.
Analysts say the development of distressed-debt funds can be an early sign that credit markets are beginning to adjust to the market turmoil that started with subprime loans and spread quickly throughout other debt markets. But these vulture funds also face considerable risks if the debt markets remain depressed and hard to trade for longer periods than the fund companies anticipate.
That’s the gist of the short article. You can read it by CLICKING HERE.
Nice to see PIMCO is doing its part instead of merely crowing for a government bailout. Gross is putting his money where his mouth is. Kudos for that.
In chaos there lies an opportunities and there are plenty in housing industry. Excellent job PIMCO. Don’t worry about government and home buyers. As far as I concern, they are in deep trouble.
Now there’s a market sign. When the smart money (like Pimco) starts lining up, opportunity has arrived.
I think a few companies who are stable and smart enough are going to make a killing on distressed RMBS.
I think for these guys the key is making sure the money they invest is backed by solid collateral. Triple check the “value” of the asset, and loan (invest) to your hearts content.
Careful though, the asset values are dropping like a rock. A tip for Mr. Gross: Sample a good portion of the appraisals that are supposed to be backing the loans.
Do a thorough review of the sample. Given current distressed conditions, the values should NOT reflect closed sales, rather current asking prices. Adjust the recent closed sales down to the actives and you have TODAYS true fair market value. Continue to adjust downward depending on current inventory and you will insure yourself a virtually risk free investment. Oh yea, one more thing Mr. Gross. Make sure the people who are taking out these loans actually have income, cash assets and are only looking to borrow 80% LTV.
Follow these rules and you will make a killing!!
Good luck, OC is counting on you.