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Hedge Funds Subprime Mortgage Bonds

Hedge Funds Subprime Mortgage Bonds

Hedge Funds Looking to Get Back into Subprime Mortgages

Hedge funds are once again returning to betting on a now notorious asset. The Federal Reserve is trying to sell off subprime-mortgage bonds and hedge funds are said to be "champing at the bit" to get a hold on some of the assets. The Federal Reserve had to absorb a large number of the subprime-mortgages that nearly bankrupt AIG.
“Champing at the bit,” is how one hedge fund trader who invests in distressed debt put it.

The Wall Street Journal reported Friday that the Fed had tapped asset management firm BlackRock to help sell off portions of the $30 billion Maiden Lane II portfolio, which is made up of bonds and derivatives acquired when the government bailed out American International Group.

Earlier this month, AIG offered to buy the bonds from the Fed for $15.7 billion—about half their face value.

People familiar with the matter say the interested hedge funds include John Paulson’s Paulson & Co, Jeff Gundlach’s DoubleLine Capital LP, Mark Lasry's Avenue Capital Group and Oaktree Capital Management. The funds either could not be reached or declined to comment. They declined to comment for competitive reasons. Source

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