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Trading Now

Monday, September 14, 2009

Let the Rigging for 3Q begin: Ross buying distressed assets from pension funds who were sold toxic assets by banks and US taxpayers pick up any slack

*And the US taxpayer is guaranteeing low interest loans. Some people will say, "but they are providing a valuable and much needed service." Oh yeah? Then why is my country bankrupt? AND WHERE THE HELL IS MY LOW INTEREST LOAN?
Wilbur Ross Sees 20% Return for Treasury-Backed Fund
Sept. 14 (Bloomberg) -- Wilbur Ross, the billionaire investor in distressed assets, projected the highest return among four firms vying for as much as $200 million from Connecticut state pensions to buy troubled mortgage securities.

Ross’s firm, working with parent Invesco Ltd., expects to return 20 percent a year from a fund participating in the U.S. Treasury’s Public Private Investment Program, according to state pension officials. AllianceBernstein Holding LP and Marathon Asset Management LP each estimated 18 percent gains, while Wellington Management Co. forecast 13 percent to 17 percent.

“The substantial discount to par allows for outsized returns in a recovery scenario,” M. Timothy Corbett, chief investment officer of the Connecticut Retirement Plans and Trust Funds, wrote in a Sept. 2 memo, referring to the opportunity to buy mortgage-backed securities for less than face value.

Corbett’s memo to state Treasurer Denise Nappier offers a glimpse of how money managers are courting investors for funds that will buy as much as $40 billion in mortgage securities from banks with financing provided by the Treasury department’s program, also known as PPIP. The department in July selected the four firms bidding for Connecticut’s money, along with five others, to establish PPIP funds.

The companies are each seeking to raise $500 million to $1.1 billion, with the government matching that and providing low-interest loans of as much as $2.2 billion. PPIP’s goal is to aid the economy’s recovery by removing devalued mortgage securities from banks’ balance sheets, freeing them to make more loans.

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