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 a Bloomberg report.
Pimco’s Distressed Senior Credit Opportunities Fund, known as “Disco” for short, is set to buy bonds backed by commercial and home 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 mortgage market and subsequent downturn in the larger credit market.
The fund plans to focus on mortgages that aren’t backed by the government or related companies such as Fannie Mae and Freddie Mac, as well as securities backed by home equity lines of credit, credit card debt and auto loans, according to the report.
While many have been burned with mortgage investments, Pimco is hoping to capitalize on fire sales.
Pimco’s Co-Chief Investment Officer Bill Gross said in February that the company 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.
