Bloomberg News

Invesco Liquidates PPIP Fund Earning U.S. Treasury 18% Return

April 03, 2012

Invesco Ltd. (IVZ:US), one of nine companies chosen to manage a government-subsidized program opened in 2009 to revive the mortgage-backed securities market, said it had returned money to investors, giving the U.S. Treasury an 18 percent annualized return over 29 months.

Invesco’s fund that participated in the Public Private Investment Program returned $719 million in equity capital to the Treasury and $1.2 billion in loans, plus interest, the Atlanta-based company said today in a statement. The company didn’t disclose profits for private clients, who invested $581 million, and were also receiving their money back, Bill Hensel, a spokesman, said in a telephone interview.

“The PPIP program has resuscitated the private label mortgage-backed securities market and, at least in our case, resulted in a handsome profit to Treasury,” Wilbur Ross, chairman of WL Ross & Co., an Invesco unit, said in the statement. Ross oversaw Invesco’s PPIP investments.

Invesco is cashing its investors out after a rally in mortgage bonds. PPIP fund returns were reduced last year as Europe’s debt crisis roiled global markets. PPIP managers aren’t required to return money until at least eight years from the funds’ initial closings in 2009.

Investors’ ability to borrow from private sources has improved since PPIP opened, particularly through repurchase agreements, or repos. A total of $37.5 billion of mortgage securities without government backing were being used as collateral for such loans as of March 9, according to Federal Reserve data. Investors can now borrow more than 10 times their capital to buy the debt, compared with the 2-to-1 leverage provided by the Treasury under the PPIP.

Other PPIP managers included AllianceBernstein Holding LP and BlackRock Inc., both based in New York. TCW Group Inc. liquidated its PPIP fund beginning in January 2010 after its former investment chief, Jeffrey Gundlach, left the Los Angeles- based firm.

To contact the reporters on this story: Christopher Condon in Boston at ccondon4@bloomberg.net; Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net


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Companies Mentioned

  • IVZ
    (Invesco Ltd)
    • $37.74 USD
    • -0.62
    • -1.64%
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