Tosca Doubles Down On Subprime Mortgages

Apr 27 2010 | 2:38am ET

Toscafund Asset Management is bidding to become one of the largest players on the European secondary mortgage market with a pair of new funds investing in the space.

The London-based hedge fund has already closed one fund focused on British subprime mortgages with £250 million. It’s now hoping to raise another £250 million for a second fund that it plans to launch this summer.

Tosca’s first mortgage fund is off to a fast start, on track to return 22% to investors this year, the Financial Times reports. The Tosca Mod Fund bought up U.K. subprime mortgages from banks seeking to unload them at a discount last summer, often grabbing the highest-quality mortgages of the lot. The fund paid roughly 60% of face value for the mortgages.

The second fund, Tosca Enhanced Mod, will buy mortgage-backed bonds and other securitized mortgage securities in addition to distressed mortgages, according to the FT, targeting returns of 8% to 12% annually over a five-year period.

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