LatAm report 5: GMG sees mortgage book opportunities in Mexico

GMG Investment Advisors has its eyes on the potential for future opportunities from delinquencies in Mexican mortgages, but is kept busy now with a fund holding both such opportunities, more broadly spread geographically across Latin America, and also holding consumer loans often taken out via store and personal credit cards in Mexico, Colombia and Peru.

The New York-based manager has about $50m in assets under management in a portfolio for such distressed assets, and another focused on Latin American pre-export, heavily collateralised trade finance and heavily collateralised commodity-based lending.

Jamie Viceconte (pictured), partner and manager of the distressed fund, explains the distressed assets portfolio – GMG Credit Opportunity Fund – ranges across various mortgages and consumer credit loans. He describes a Latin American population whose access to credit has grown by 30% in some countries last year as “humming, and we see that in consumer credit growth, which is maybe stronger than you would want to see in terms of prudent lending”.

Largely because of the region’s commodities-fuelled boom, he adds the markets for single name corporate distress in Latin America has fallen away sharply recently.

He says GMG Investment Advisors expects a rise in mortgage distress in Mexico, and the GMG Credit Opportunity Fund could increase its roughly 20% present allocation to that country in the future. About 60% of assets are in Colombia, and 20% in Peru. GMG has had a mortgage recovery operation in Mexico since the middle of the last decade.

To access the combined output of such markets, European investors would contact GMG Investment Advisors directly. The fund has a US dollar class.

Viceconte says: “In Mexico you have higher credit penetration rates than in either Colombia or Peru. In Mexico we think there are big opportunities in the mortgage space. They had a crisis similar to the US where they were getting levels of securitisation on sub-prime loans and a lot of deals are running on 15% to 20% default rates and the markets are frozen. A lot of assets are on mortgage companies’ books and we think that is a potential source of activity over the next 12 to 24 months.”

 

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