Pretium holds final close on residential credit fund at $1.7bn

Second fund exceeds its target and is nearly twice the size of its predecessor.

Pretium held a final close on its second residential credit fund at $1.7 billion, Private Debt Investor has learned. Pretium Residential Credit Fund II exceeded its $1.5 billion target and is nearly twice the size of its predecessor, sources said.

The fund invests in residential mortgage loans that often get restructured to help borrowers move past a life event or change in income. The fund also invests in new origination mortgage loans made to people who fall outside the government system, such as self-employed entrepreneurs. The parent company is the largest private operator and owner of single-family housing in the US, with some 80,000 homes.

The latest residential credit fund was launched in 2020 and has a target net rate of return of mid to high teens, the sources said. The fund will benefit from Pretium’s integrated ecosystem, which includes a specialty loan servicer, a non-qualified mortgage originator and a business purpose lender geared to home renovations, they added. Although Fund II uses leverage, the fundraising numbers don’t take that into account, the sources said. The predecessor fund, which was launched in 2014, is in its harvest period and is on track to achieve double-digit net returns, per the sources.

“Our returns are driven by our ability to successfully restructure loans to help borrowers find sustainable payment structures that keep them in their homes and maximise the value of the loans for our investors,” Matt Nichols, senior managing director and co-head of residential credit at Pretium, said in a statement. Big banks have avoided loans that need restructuring since the Global Financial Crisis, the sources said, creating an opportunity for Pretium.

Pretium Residential Credit Fund II received “a lot of new investor interest”, the sources said. It includes a $150 million commitment from Teachers’ Retirement System of the State of Illinois, according to PDI research.

Pretium’s strategy “reflects the decades of experience our team has across all aspects of mortgage investing and through multiple economic cycles”, Jonathan Babkow, senior managing director and co-head of residential credit at Pretium, said in a statement.

Pretium is a specialised investment firm that focuses on US residential real estate, residential credit and corporate credit. Based in New York, Pretium had more than $40 billion of assets under management as of 1 January 2022.