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November 16, 2018  

Freddie Alum Targets Distressed Mortgages

A mortgage-market veteran who most recently oversaw Freddie Mac’s holdings of distressed home loans and pre-credit-crisis mortgage bonds has opened his own investment shop.

After leaving Freddie in October, Adama Kah formed Kah Capital of McLean, Va., with the aim of launching a hedge fund that would invest in nonperforming and re-performing mortgages, as well as newly originated home loans. He also would trade mortgage-backed securities, with a focus on deals backed by distressed assets.

There’s talk that the firm eventually would issue bonds backed by nonperforming and re-performing loans.

Kah appears to be aiming to raise about $500 million — a realistic target, sources said, given his experience managing similar portfolios at Freddie. One source said Kah already has inked a deal with an unidentified investment firm for an undisclosed amount of seed capital, presumably in exchange for a minority equity stake or a share of revenues.

Joining Kah in the effort is Chandrajit Bhattacharya, most recently head of research at Pretium Partners. Pretium, a New York firm with about $9 billion under management, is a routine issuer of bonds backed by nonperforming loans and rental-home cashflows.

Bhattacharya joined Pretium in 2014 from Credit Suisse, where he oversaw research of non-agency mortgage bonds and asset-backed securities. Before that, he worked in the mortgage-research group at Bear Stearns.

Kah originally worked at Freddie from 1997 to 2001 as an economist, then spent several years as a structured-product portfolio manager at Time Square Capital, followed by a stint in the mortgage-bond strategy group at Credit Suisse. He rejoined Freddie in 2007.

From 2011 on, Kah’s job was to manage multi-billion-dollar portfolios of defaulted mortgages, rehabilitated home loans and non-agency mortgage bonds Freddie purchased prior to the 2007-2008 market crash. Kah’s group contributed collateral to risk-transfer securitizations Freddie issues under its Structured Agency Credit Risk label.

Through private-market sales of whole loans, the team also helped spur issuance of bonds backed by nonperforming and re-performing mortgages — an asset class that has grown rapidly in the past few years. Full-year issuance volume is expected to reach $60 billion this year, up from less than $30 billion in 2016, according to Bank of America.

Kah was replaced at Freddie by Terin Vivian.