View more on these topics

Hedge fund reveals distressed mortgage appetite

A US hedge fund has revealed that its main acquisition target is now distressed, under-valued mortgage debt.

In an interview with Reuters, T2 Partners founder Whitney Tilson revealed that the private equity firm had been “trimming” its equities book in an attempt to raise capital to buy “extremely attractive” distressed mortgage debt.

Tilson said: “Distressed debt returns are extremely attractive, rivalling returns from equities. For the first time in our history we are dabbling in this area.”

The hedge fund admitted between 10 per cent and 25 per cent of its capital was being invested in the bad mortgage debt to capitalise on the “huge cash flows” they are bringing into the group.

He added: “We are buying senior mortgage tranches at 30 cents in the dollar. We think it is going to make loses, almost certainly, but you can make enormous returns.”

Mortgage industry figures have expressed concerns over this practice. In last week’s Money Marketing former Edeus chief executive Michael Bolton accused such firms of making a “very quick buck” on such distressed mortgage backed securities.

Recommended

Crisis management

Recent weeks have been more unnerving than many advisers and their clients have ever experienced. Many advisers are already taking steps to deal with the aftermath.

AMI fears interest pledge will pile on more debt

The Association of Mortgage Intermediaries is concerned that the Government’s offer of a two-year exemption from paying mortgage interest could exacerbate problems by piling more debt on to borrowers.

Home in on the fraudsters

In the falling property market, mortgage fraud has again been hitting the headlines. A constantly rising property market hides a multitude of sins but when prices start dropping, the chickens come home to roost.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment