Monday, 8 February 2016
Last updated 3 hours ago
Apr 23 2008 | 2:00am ET
Los Angeles-based Dalton Investments, a $1 billion Asia-focused alternatives shop, is jumping into the fray with the launch of its first mortgage debt hedge fund.
Rather than a traditional hedge fund, the firm is offering a series of trusts—the first one will launch in mid-May—within the mortgage space with a minimum of $50 million in initial assets, according to a source familiar with the firm’s initiatives.
“It’s a one-time close per series, so they’re planning on launching another one sometime in July,” the source told FINalternatives.
“Each series will have different liquidating terms, so by the time the second series is launched, the first one will be invested,” the source added. “After six months, they’ll start returning cash flow from the portfolio to investors and they anticipate that in three years, they‘ll be done liquidating any remaining securities in the portfolio.”
Dalton is taking a buy-and-hold approach to the market because the “returns that you get are not dependent upon the resale of those securities but reliant upon the structure of those securities and the cash flow that they generate.” The firm is putting together its portfolio of subprime securitized assets “security by security” and performing analyses at the individual loan level, with the help of new hires, Todd Sherer and Ryan Hetherington, former distressed traders at Countrywide Financial Corp.
“The hires give the firm an added cushion because they ensure the quality of the bonds that it buys,” said the source.
The new offering is Dalton’s fifth. The source said the firm’s Asian strategies are doing well realtive to the indices but not on an absolute basis because of the exodus of capital in the region.