Yesterday, Bloomberg’s Sree Vidya Bhaktavatsalam reported that Pacific Investment Management Co., which was founded by legendary investor Bill Gross and is the biggest manager of bond funds, is actively seeking as much as $5 billion to purchase mortgage-backed debt, according to two investors with knowledge of the matter. Bhaktavatsalam wrote:

The Distressed Senior Credit Opportunities Fund will invest in “senior” and “super-senior” securities backed by commercial and residential mortgages, said the people, who asked not to be identified because the fund is private. Senior debt is first to be paid off in a default…

The new Pimco fund, dubbed Disco, will focus on commercial loans as well as residential debt that doesn’t carry explicit government guarantees or the implied backing of securities issued by companies such as Fannie Mae or Freddie Mac, the investors said. It also will seek investments in securities backed by home-equity, credit-card and auto loans, they said, and can invest in debt secured by collateral outside the U.S.

The Disco fund has a 15-month investment period and a 5-year life. It will be jointly managed by Pimco’s credit teams in the U.S. and Europe, the investors said.

Bloomberg Bhaktavatsalam also noted in the piece:

Gross’s Total Return Fund advanced 9.4 percent in the past year to beat 99 percent of competing bond funds, according to data compiled by Morningstar Inc. in Chicago. The fund had 61 percent of its assets in mortgage securities as of June 30, up from 53 percent a year earlier.

Source:

“Pimco Seeks as Much as $5 Billion for Distressed Debt (Update1)”
Sree Vidya Bhaktavatsalam
Bloomberg, August 27, 2008

This post is filed under Bill Gross, Bonds, Mortgages, Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.