TCW Group Inc. plans to start an investment fund of as much as $1.5 billion to buy distressed mortgage-backed securities as the real estate slump deepens, said Jeffrey Gundlach, the Los Angeles firm’s investment chief.
TCW will raise money from institutions and wealthy individuals, and the fund will open in the first quarter of 2007, Gundlach said Wednesday.
Delinquent payments, falling home prices and rising borrowing costs have shaken the U.S. property market after a five-year boom. Gundlach said TCW would invest in mortgage- backed securities that have declined enough to compensate for a risk in loan defaults.
“There are profits to be made by being capitalized and ready to get into the market when others are getting out,” he said.
Gundlach’s $523-million TCW Total Return Bond Fund climbed an average of 5.6% a year since August 2001, beating 98% of its competitors.
TCW is owned by Societe Generale of France.