ACM FUND II

Leveraged Mortgage Income Fund

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Industry

Financial Services

Company Type

Fund

Size

$105 Million Equity

Investment Type

Equity

OVERVIEW

Algebraic Capital Management (“ACM”), a US-based manager, is raising approximately $100 million USD to be drawn in stages for its second mortgage income fund (“Fund II”). 

Strategy

  • Fund II will invest in the equity tranche of Canadian ‘AAA’ rated prime-credit residential mortgage-backed securitizations
  • Canadian prime-credit non-agency mortgages (“PCMs”) pay a premium yield and have amongst the lowest default rates in the world

Track Record

  • ACM’s team established its first direct mortgage income Fund I in 2020
  • The $50 million portfolio has outperformed benchmarks since inception with a 0% default rate (past performance is not indicative of future results)

Competitive Advantage

  • ACM is partnered with originators of premium yield non-agency mortgages to purchase more than $1.5 billion in assets over the life of the Fund

Underwriting/Servicing

  • True North Mortgage (“TNM”) handles underwriting and servicing
  • Currently servicing $4 billion portfolio with a 0.08% arrears on all mortgages originated over its 20 years in business

WHY INVEST?

Risk Adjusted Returns

Low-risk assets in a developed jurisdiction with consistent cash flows

Strong potential returns expected from applying leverage to an existing strategy

Uncorrelated Returns

Fund I has provided consistent returns that are uncorrelated to the larger market and other similar benchmarks

Fund II will target mortgage assets with the same uncorrelated characteristics

Emerging Manager

Investors have the unique opportunity to invest and participate in an emerging manager with strong tailwinds

Potential for unique beneficial terms for seed investors/partners

ESG

Fund II is willing to meet investor requests for strong ESG representations and warranties (as opposed to a mere commitment to “consider” ESG principals when making investments)

Diverse Team

Opportunity to invest with a minority-owned manager with a well-credentialed team

Significant female management and ownership

STRATEGY – SIMPLE & PROVEN

Fund II will seek to generate its income from the difference in revenues coming from the premium yield of a portfolio of non-agency PCMs and the efficient cost of ACM’s warehousing and securitization facilities

Based on current market-based pricing and may be subject to revision based on market conditions.

High quality origination with strong Canadian underwriting standards

Continued bank-administrator monitoring during the warehousing period and by first-tier rating agencies during the securitization period support continued quality origination

Canadian underwriting standards for all types of mortgage loans showed strong resilience during the Financial Crisis compared to the U.S.A.

Fund I has generated consistent income for its investors since 2020 from a portfolio of mortgages that was originated through the same platform that Fund II will be utilizing

HIGH GROWTH AND LOW RISK ASSET

Non-agency PCMs must be used for:

    • Any home value greater than $CAD 1 million
    • Any mortgage refinancings
    • Any unique mortgage terms and structures

Structural characteristics of the Canadian mortgage market create a demand for non-agency mortgages because they must be used to:

    • Finance homes in expanding urban centers like the Toronto and Vancouver areas which have growing average prices of greater than $CAD 1 million for single detached homes
    • Meet any mortgage-refinancing needs of consumers that are seeking better financing terms
    • Serve the requirements of relatively high immigrant populations that seek unique financing structures and terms

Canadian mortgages have among the lowest arrears rates in the world

Canadian current arrears rate of 0.18% nationally, as compared to the United States’ rate of 3.34%

THE TEAM

Fund Manager


  • Seasoned investment management, finance and legal professional with significant transactional and fund experience, spans securitizations of mortgages, transportation/shipping assets, auto loans, and agricultural assets
  • Has advised credit funds, private equity funds, real estate funds, litigation funds and other alternative funds on a wide range of issues including fund formation, LP investments, secondary sales and general partner seed investments/stake sales
  • JD/MBA and New York licensed attorney
Fund Operations and Finances


  • Has worked with quasi-governmental institutions, private equity sponsors, insurance companies and development banks on a wide range of issues in the areas of project finance, structured finance, project economics and corporate operations
  • Substantial experience as a credit ratings analyst with one of the foremost global credit rating agencies, which has enabled a deep understanding of everything from complex financial analysis to project operations
  • B. Eng, M. Econ and MBA
Asset Origination Manager


  • Developed a successful non-agency mortgage digital origination platform that provides pipeline for Fund I’s outperforming portfolio. Digital platform will play a key role in generating a continuous pipeline of non-agency PCMs that Fund II will purchase
  • Established Fund I and is currently managing Fund I portfolio
  • Doctorate in Business Administration
Asset Origination Operations


  • Supervises the sourcing of assets into the existing Fund I outperforming mortgage portfolio and has developed relationships with institutional grade-originators and servicers to ensure the continued sourcing of high-quality non-agency prime mortgage assets for Fund II
  • Significant technical knowledge in structuring and managing home financing products on a retail level
  • CPA, CSAA
Learn More About Algebraic Capital Management Fund II
Thank you for your interest in Algebraic Capital Management Fund II.Please fill out your information and we will contact you shortly with more information on this opportunity.

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CONTACT US

Hi. We're not around right now. But you can send us an email and we'll get back to you, asap.

Thanks, Ken

Ken Margolis | Managing Partner Castle Placement, LLC
1460 Broadway Street, Rte 400
New York, New York 10036
(212) 418-1188 | C: (516) 712-7784
kmargolis@castleplacement.com

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