Unfazed by Disruption

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When COVID-19 started to topple markets in March 2020, every headline seemed to bring on panic selling. Through this period of chaos and uncertainty, we felt compelled to step in and buy securities we felt were mispriced and available only due to short-term market dynamics. With the flexibility to move quickly, we organized capital and raised $232.5M to provide liquidity.

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Our thesis was that aggressive monetary support would stabilize the economy and support risky assets, fiscal spending programs would support employment and state finances, and COVID-related cases would dissipate, driving a recovery. We specifically targeted securities backed by first liens on commercial real estate assets that we viewed as mispriced, such as: (i) single asset single borrower loans, (ii) commercial real estate collateralized loan obligations (iii) interest certificates predominately stripped from AAA/AA/BBB bonds and (iv) BBB rated CMBS conduit securities collateralized by 5- to 10-year real estate loans.

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Consistent with our these, markets eventually recovered, spreads tightened, and we were able to realize gains. As conditions normalized and the opportunity set narrowed, we unwound the investments. Although we would not want to relive the circumstances that brought this market chaos, we took comfort in our ability to act in a quick and decisive manner and for our partners to benefit from this strategy.