Deer Park targets up to $1B for second RMBS fund as spreads widen
What's the deal? Deer Park RoadDealroom has a profile for this one. Try Dealroom → Management has launched Deer Park Mortgage Opportunity Fund II, a closed-end vehicle buying non-agency US residential mortgage-backed securities (RMBS). The fund is targeting about $500 million, with scope to exceed $1 billion, and is open to accredited individuals and institutions.
Why now? Elevated interest rates and reduced investor participation have weighed on non-agency RMBS valuations, which Deer Park says creates "attractive entry points" across the market. Rate volatility has made pricing choppier: September issuance fell to $15.3 billion from $19.4 billion in August as rates rose.
What's the endgame? The fund has an initial three-year term, with the option of two further one-year extensions. It builds on Fund I, which launched in January 2024 with $168 million of commitments and reported a 9.19% annualized net return through June 30, 2026.
"Higher mortgage rates and an increasingly diverse mix of collateral and transaction structures have created pricing inefficiencies in non-agency RMBS that we believe can be captured through disciplined, loan-level credit work," said chief investment officer and managing partner Scott Burg.
Who's behind it? Based in Steamboat Springs, Colorado, Deer Park is an alternatives manager specialising in structured credit, with around $2.5 billion in assets under management.
What could go wrong? The predecessor fund's track record, while solid, is limited, and widening spreads cut both ways. The entry points Deer Park is chasing could keep moving if volatility persists and spreads widen further.
The signal: This is a targeted bet on volatility-driven dislocations, not a broad retreat from mortgage credit. With 2026 non-agency RMBS issuance running ahead of last year's pace and credit fundamentals described as resilient, Deer Park is wagering that unsteady pricing — not deteriorating collateral — is the real opportunity.
Read more: alternativecreditinvestor.com
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