The Public-Private Investment Program (PPIP) for legacy assets latest quarterly report showed that $7.4 billion was raised and matched by the Treasury.
Using 1x leverage, the PPIP managers have $29.4 billion in buying power of which they have spent $18.6 billion or means they are 63% invested.
Since 2Q10, they have put an added $2 billion to work, which is the lowest amount that has been seen in any quarter. This is most probably reflective of the low interest rate environment, according to Scott Buchta from Braver Stern Securities.
Over the quarter, RMBS market value increased by $3.3 billion ($19.3) while CMBS rose $1.0 billion ($3.4). The CMBS AMs were still the biggest holding at 40% followed by AJs at 29%. Meanwhile, A4s dropped as a percentage of holdings to 11% from 18%.
RMBS Alt-As were still the largest holding at 45% followed by prime at 37%. The relationship between Alt-a, prime, subprime and MTA stayed constant througout the quarter.
Total returns are all positive due to the rally in dollar prices and the low relative level of funding that these funds have received. Challenges going forward include finding suitable assets that fit yield and performance bogeys and exposure to a rising interest rate environment (from the funding side).
According to Buchta, he expects PPIP managers to remain a solid back-stop bid for the markets. Their "dry powder", he added, might help stop any real price volatility to the downside going into the end of 2010.