(Bloomberg) -- Canada's Polar Asset Management Partners Inc. received more than $215 million in commitments for the first close of a fund that will invest in significant risk transfer deals.
The Toronto-based asset manager's new vehicle — called CRS Fund-II, for "credit risk sharing" — will deploy the money into transactions with Canadian financial institutions, according to a statement seen by Bloomberg News.
Banks use significant risk transfers, or SRTs, as a way to insure loans against default and free up capital for new business. They do it by selling the risk on bundles of loans to private lenders and hedge funds such as Polar, using credit-linked notes or other instruments. In return, investors receive coupon payments that sometimes exceed 10%.
SRTs are becoming more popular with banks as a way to improve balance sheet flexibility and manage regulatory capital levels. Bank of Montreal recently completed two significant risk transfers covering about $5 billion of corporate loans.
Polar has been one of Canada's most active investors in structured credit, putting about $1.3 billion toward 20 risk-transfer deals since 2011. Its first SRT-focused fund is fully deployed.
"A strong first close of CRS Fund-II builds on more than a decade of experience in structured and opportunistic Canadian credit," Chief Executive Officer Greg Lemaich said in the statement.
Polar plans to begin investing the new money right away, taking advantage of what it sees as a robust pipeline of transactions. Several SRT deals are targeted for execution in the second half of this year.
Founded in 1991, Polar manages about $5.7 billion across several investment strategies.
The new fund is part of Polar's strategy of broadening its presence in structured finance. The firm is also building a mortgage lending and securitization business focused on Alt-A residential mortgages, having originated more than C$500 million ($359 million) of loans through a partnership with mortgage company Nesto Inc. Polar is preparing its inaugural residential mortgage-backed securities transaction, expected to be issued this year.
More stories like this are available on bloomberg.com
