Invesco PowerShares, a well-known ETF provider, has filed to launch two actively managed funds that invest in Alt-A and prime mortgages.
Isn't everyone trying to SELL mortgages? Exactly. That's where Invesco thinks there may be an opportunity.
The first ETF, the Prime Non-Agency RMBS Opportunity Fund, buys prime mortgages--mortgages for borrowers with a relatively low risk profile with a strong credit history.
The second, the Alt-A Non-Agency RMBS Opportunity Fund, would buy Alt-A loans, which are lower or alternative documentation loans made to borrowers whose risk profile falls between prime and subprime.
No mention of buying subprime, but Alt-A mortgages were big in what were called liar loans, low or no-documentation loans, which now have much high default rates.
But while everyone is trying to figure out how to sell these assets, Invesco says they smell an opportunity. "We believe that various economic factors have converged to push the prices of many Prime and Alt-A residential mortgage backed securities well below their fundamental value," Invesco PowerShares CEO Bruce Bond said.
Both of these funds would be actively managed, that is, they would not be tied to an index, the decision on what to buy would be made by managers at PowerShares.
This is the first fund buying Alt-A mortgages. There are funds that buy Ginnie Maes and Fannie Maes, but stay tuned on this one.
They are providing liquidity to a market that desperately needs it.
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