Public Employees Retirement Association of New Mexico (New Mexico PERA) has hired Cerberus Capital Management to invest $100m (€89.4m) in residential loans in Europe and the US.
The pension fund confirmed to IPE Real Estate that it is targeting re-performing loans, where borrowers were behind on payments but have since resumed.
The Cerberus Residential Opportunity Fund, structured exclusively for New Mexico PERA, will buy and securitise loans originated between 2001 and 2016.
It plans to invest a similar amount of capital in Europe and the US.
New Mexico PERA defines re-performing loans as those that have not missed a payment in more than 48 months.
“Fast-forward eight years beyond the housing crisis and many impaired mortgage assets are now re-performing,” the pension fund said, referring to the US market.
“Some have undergone principal balance reductions through Federal mortgage modification programmes.
“With housing values up, employment down, wages inching up and securitisation channels once formerly dominated by banks and broker-dealers gone due to Dodd-Frank, there is ample opportunity to find, buy, securitised and sell re-performing mortgage loans into a hungry environment.”
New Mexico PERA expects a 16% gross internal rate of return from the strategy.