Newport Beach-based Pacific Investment Management Co. is looking to invest as much as $5 billion in mortgage bonds with a new fund, according to Bloomberg.
The Distressed Senior Credit Opportunities Fund, also known as “Disco”, will buy bonds backed by commercial and residential mortgages, an unidentified source told Bloomberg.
The fund was set up to specifically go after investments that have sunk in value since the collapse of the subprime credit market.
It will focus on mortgages that aren’t backed by the government or institutions like Fannie Mae and Freddie Mac, as well as securities backed by home-equity, credit cards and auto loans, the source said.
Investment holding times will be for about 15-month periods, looking to achieve gains over a five-year run.
While many investors have been burned with their mortgage investments, Pimco is hoping to capitalize on fire sales of the assets.
Pimco’s Co-Chief Investment Officer said in February that it would start investing in the mortgages and municipal bonds.
In May it was reported that Pimco bought $2.5 billion worth of subprime mortgage bonds from Israel’s Bank Hapoalim Ltd.
Pimco avoided buying subprime mortgage bonds at the height of their popularity a couple of years ago.
It manages $830 billion in assets as part of Munich-based insurer Allianz SE.
