Goldman Sachs Group is rolling out a new fund at the beginning of the month.. and they’re betting on a housing recovery. According to Bloomberg, Goldman is joining the hedge fund ranks of Hayman Capital, Cerberus Capital, and Canyon Partners in raising money for a mortgage backed product. The goal of these new funds is to take advantage of the recent appreciation in the $1.1 trillion dollar market in non-government backed mortgage securities. The market consists of the remnants from the causation of the 2008 crisis, primarily ARMs (adjustable rate mortgages) and Alt-A ARMs. Since last November, the senior bonds tied to these products have appreciated 16% or so and are now trading for 52 cents on the dollar. Although still below their 2011 highs, several firms are citing a seeming bottom in the housing market combined with a strengthening jobs market as cause for the shift in sentiment on the housing sector.
Goldman’s fund starts with a minimum investment of $500k and will not use any type of leverage or derivatives to increase bets. Although the housing market is agreeably looking much healthier than it did just last year, the ongoing investigation of Goldman’s participation in selling their clients mortgage products designed to fail while their prop trading desk took the other side of the trade is still fresh in many investors minds. Tread carefully..
Goldman Bets on Property Rebound With New Fund: Mortgages – Bloomberg.