Cheyne Capital Management (U.K.) LLP, a hedge fund firm which oversees $5.5 billion, is boosting the allocation of lower-rated British mortgage debt in one of its funds.
Cheyne “sees value” in lower-ranked U.K. mortgage-backed securities for its Queen’s Walk Investment Ltd. fund, partner Shamez Alibhai said, without saying how the firm came to that conclusion.
“After strong profits from investments on triple-A residential MBS we are moving down the structures of the transactions,” Alibhai said.
Queen’s Walk invests most of its 120 million euros ($165 million) in mortgage-backed securities. The fund sold 3.4 million euros of AAA rated notes with an equivalent annual profit of 28 percent, the fund said yesterday in its fourth- quarter results.
The U.K. property market is rebounding after its worst slump since the early 1990s, with Bank of England data showing mortgage approvals close to a one-year high in December. Delinquencies of more than 90 days on higher-risk, non- conforming mortgages declined to 18.6 percent in the last three months of 2009 compared with 19 percent at the end of September, according to Fitch Ratings.
Buy-to-Let
Cheyne is focusing its purchases on debt backed by non- conforming and buy-to-let mortgages, loans which the mortgage holder repays using rental income, Alibhai said. Queen’s Walk is also buying the mezzanine portions of bonds backed by mortgages on commercial property, he said.
“Now we are buying double-A and single-A notes, usually located at the mezzanine portions of the deals, at an average price of 44 cents,” Alibhai said. The rankings are the third- and sixth-highest investment grades.
So-called mezzanine pieces of issues sold by Northern Rock Plc, among the most liquid of mortgage-collateralized debt, rose 10 cents so far this year, compared with 1 cent for the top- rated portions, according to JPMorgan Chase & Co. Northern Rock was nationalized in 2008 after depositors withdrew funds on concern the Newcastle, England-based bank had borrowed too much using mortgages as collateral.
Banks create mortgage-backed securities by pooling home loans and selling them to investors as notes with varying risk and returns.
Author Resource:-
Cheyne Capital is one of Europe's leading alternative asset managers. Cheyne Capital Management (UK) LLP is authorised and regulated by the UK FSA and, along with other parts of the group, is a registered investment adviser with the US SEC. Cheyne launched its first fund in 2000 and today manages net assets of approximately $5.5 billion across a diversified suite of products.
![[Valid RSS feed]](http://articlepile.com/images/icon_Rss.png "XML Feed For RSS"){kind=icon}
Category Rss Feed
Print This Article
Add To Favorites