The NY Times reported on Sunday that BlackRock intends to open up the market for distressed assets – previously limited to institutional investors and hedge fund types – to “ordinary Americans”:
BlackRock is putting together an investment fund that it says will give ordinary Americans a chance to profit from the financial bailouts that they are paying for. The company quietly filed plans on Friday to raise money for the vehicle.
For investors, the potential risks are considerable. The closed-end fund is to buy distressed mortgage securities from financial companies – the very investments that have hurt so many banks. It would be the first product aimed specifically at Main Street that is linked to the government’s now-diminished Public-Private Investment Program, which is meant to help purge these institutions of their worrisome investments.
Because quasi-ownership through having funded the Tarp, PPIP et al wasn’t enough for the US taxpayer, who one must also assume is canny enough to make risk-reward assessments of the type so successfully practiced by those paid to do so on Wall Street.
At least BlackRock is looking out for the little guy. According to the NY Times (emphasis ours):
In an effort to mitigate the risk to investors, the fund will limit itself to securities backed by residential and commercial mortgages that were originally rated AAA by at least two ratings agencies before this year. BlackRock will halve its usual management fees for the fund.
Good thing none of these securities have been downgraded since December 2008, then, or that ratings agencies have revised sharply upward their assumptions for losses thereon…
Related links:
Free money! Honest – FT Alphaville