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"Deer Park maintains high conviction in legacy non-agency RMBS and distressed CMBS, driven by collateral quality rather than rate movements. Legacy mortgage pools with 20-year seasoning demonstrate extraordinary payment persistence and declining delinquencies."
Deer Park Total Return Credit Fund returned +0.38% in Q2 2026, maintaining its focus on legacy non-agency RMBS and distressed CMBS. The core thesis centers on collateral-driven returns rather than rate dependency. Legacy RMBS performed positively despite hawkish Fed repricing, validating the view that surviving borrowers after 18-20 years demonstrate extraordinary payment persistence with home-price appreciation driving current LTVs to very low levels. The average loan age of roughly 20 years, declining delinquencies, and lower foreclosure activity support the investment case. In CMBS, the unprecedented rating agency downgrade cycle created opportunities as constrained holders sold at prices reflecting regulatory constraints rather than fundamental value. Recent resolutions have validated that earlier appraisal marks overstated long-term loss severity. Fixed income and credit strategies attracted $26.4 billion of net inflows in 2025, with demand arriving into a shrunken legacy universe creating setup for spread compression. The manager views structured mortgage credit as more compelling than corporate and private credit markets, which show visible strain with tight spreads and gating pressures. The outlook remains constructive on both legacy RMBS and distressed CMBS as the most compelling risk-adjusted opportunity in credit markets.
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