The Treasury Department announced on Wednesday that it has received more than 100 applications from companies interested in serving as fund managers for the legacy securities portion of its ""Public Private Investment Program"":http://www.financialstability.gov/roadtostability/publicprivatefund.html (PPIP). Although the Treasury has not released the names of the candidates under consideration, officials said a variety of institutions applied, including traditional fixed income, real estate, and alternative asset managers.
According to a press statement from the Treasury's Public Affairs Office, successful applicants must demonstrate a capacity to raise private capital and manage funds in a manner that will protect taxpayers as investors. The Department said it will also evaluate the applicant’s ""depth of experience investing in eligible assets,"" and is only considering those companies that are headquartered in the United States.
Applicants can expect to receive notice of their preliminary qualification around May 15, the Treasury Department said. Once a fund receives this nod of approval, it can begin raising the minimum of $500 million in private capital, which will be matched with taxpayer funds for investment in under-performing asset- and mortgage-backed securities held by banks, insurance companies, pension funds, mutual funds, and individual retirement accounts.
The Treasury reiterated its intention to open the program to smaller fund managers in the future, which may result in a lower minimum requirement of private capital. The administration has encouraged small, veteran, minority and women-owned private asset managers to become involved in PPIP by partnering with other private asset managers. On Wednesday, the Treasury said it was ""pleased to see a number of creative partnership proposals among the applications"" being evaluated.
The Treasury said it considers Wednesday's announcement regarding the number of applications received to be a ""milestone"" in making PPIP operational and a step toward repairing balance sheets throughout the nation's financial system.
But according to a _""New York Times"":http://www.nytimes.com/2009/04/29/business/economy/29bank.htmlxth&emc=th_ report, PPIP has received ""a lukewarm response in banking circles."" The paper said officials from leading institutions such as Citigroup, Morgan Stanley, and PNC Financial have expressed reluctance to participate in the program. And the _Times _quoted JP Morgan Chase CEO Jamie Dimon as saying his company has no intention of being either a seller or a buyer in the government's legacy asset program.
Earlier this month, one of the world's largest hedge fund managers, Bridgewater Associates, announced that it had decided against participation in the government's legacy investment program. According to the _""New York Post"":http://www.nypost.com/seven/04022009/business/no_private_hedge_162512.htm_, the firm cited the program's one-to-one leverage for would-be buyers as too little to compel participation. In a statement regarding his decision, Bridgewater founder Ray Dalio said the numbers presented by the Treasury just didn't add up, particularly for the legacy securities piece of the plan. Dalio was less critical of the legacy loan portion of the program, the _Post _said, in which investors buy loans instead of securities leveraged between 6-to-1 and 12-to-1.
There are members of the investment community, however, who seem poised to partake in the healing of the nation's mortgage market and get in on what some are calling a strong investment opportunity in distressed property assets. Global investment giant Invesco Ltd, and its distressed investment affiliate WL Ross & Co., ""announced on Monday"":http://www.invesco.com/media/press_releases/20090427.pdf that they are prepared to commit $1 billion in existing capital to the government's PPIP.
Martin L. Flanagan, president and CEO of Invesco, said, ""We strongly believe that the Public-Private Investment Program will help stimulate the mortgage market and provide individual and institutional investors globally with compelling investment opportunities in the legacy securities and legacy loan programs.""
It has been reported by multiple media outlets that big money managers BlackRock and Bank of New York Mellon also have plans to raise funds for participation in the government's public-private investment partnership.