Buoyed by tumult in the mortgage market, a Miami-based real estate company is making the leap into the hedge fund space with the debut of two offshore funds.

ARE Asset Management has launched the ARE Fixed-Income Fund and the ARE Opportunity Fund with $100 million each. The funds will invest in the U.S. residential and commercial real estate markets, with Opportunity purchasing non-performing residential mortgages at a discount and managing those loans to recovery or foreclosure, and Fixed-Income originating low loan-to-value cash and bridge loans on commercial properties.

The Fixed-Income Fund is targeted to deliver fixed monthly dividends to investors using highly-collateralized, low principal risk investments, and is structured as an open-ended mutual fund with a range of share classes, dividend rates and lock-up terms.

“We see the bottom coming and we think it’s appropriate to get into this market before we do hit bottom,” Jeffrey Kirsch, managing principal, said. “We have turned bullish and don’t want to wait any longer for the opportunity. We can be very selective right down to the zip code where we buy, and we believe the government is doing everything in their power to turn the mortgage industry around.”

Kirsch said the firm, which has bought and sold more than $1 billion in first-mortgage residential loans during the last several years, has a distinct advantage over its hedge fund peers in that it owns its own loan processing unit.

“While hedge funds may have a lot of money and the ambition to enter this market through whole loans, I often question their ability to have these loans serviced,” he said. “It’s difficult to be in this business today without having a servicer, and most of the large servicers are owned by Wall Street companies and don’t have a lot of excess capacity on the non-performing residential side.”

Kirsch said he isn’t concerned about recent news of BlackRock and hedge fund Highfields Capital Management teaming up to buy and restructure mortgages.

“I understand that Blackrock is getting into the space with ex-personnel from Countrywide Financial, but I don’t know where they’re going to have their loans serviced because $2 billion of loans is a lot of loans and you need the man power to service those loans.”

Kirsch noted that contrary to the daily gloom-and-doom reports by the financial press about the housing market, there are many markets within the U.S. where prices have not declined and, in fact, have gone up. Markets such as south Florida, Las Vegas and California stand out as having huge downsides, he said, “but California is a large state and while parts of it are in a downturn, you can go five miles west and there are no homes for sale.”