Hedge fund firm Deer Park Road Management Co. is mobilizing capital to snap up debt tied to commercial real estate, betting the investment will eventually mint lucrative returns.

Deer Park has launched its first commercial mortgages fund targeting debt backed by office buildings at steep discounts, Chief Investment Officer Scott Burg said in an interview. The Commercial Mortgage Opportunities I fund is looking to raise as much as $500 million for the strategy that offers an 8% hurdle rate, he added.

A sustained period of elevated interest rates have hammered valuations and sparked a wave of defaults in parts of the commercial real estate market, leaving lenders rushing to dispose of some of their higher quality assets to shore up cash and avoid deeper losses.

“The volume of distress in the office space has led to price dislocation and we’re seeing commercial mortgage backed securities trade at some very deep discounts,” Burg said. “Most are dumping exposure to commercial real estate and particularly office space indiscriminately, so for us, we see this as a massive opportunity.”

Founded in 2003 by Michael Craig-Scheckman — one of the first employees of Izzy Englander’s Millennium Management — Deer Park oversees more than $3 billion in assets. Known for its profitable wagers on deeply discounted mortgage- and asset-backed securities in the year following the 2008 financial crisis, it is seeking similar opportunities about 15 years later.

The Steamboat Springs, Colorado-based firm is looking to attract investors from the the Middle East and Europe, and from multistrategy hedge funds, Burg said.

“Valuations in some cases are down about 60%-80% from when borrowers took out the loans,” Burg said. “Additionally, we are seeing cracks in multifamily and in commercial real estate CLOs where liquidity is scarce, but for us we’re happy to take that on as we have the time to invest and see out the cycle.”

It’s a similar story with REITs, with many borrowers handing over the keys and walking away as delinquencies and defaults increase, Burg said.

“We’ve stood on the sidelines while prices have fallen but now we think the time is right to step back in,” he said.

Source: The edge markets

South Korea will join FTSE Russell’s benchmark bond index next year, capping months of official campaigning and an overhaul of financial market infrastructure in the hopes of attracting tens of billions of dollars of foreign investment. 

The index provider is also adding India to its gauge of emerging-market debt from 2025, according to a statement, citing officials’ efforts to improve market access. Vietnamese stocks, meantime, were kept on a watch list for possible reclassification to an emerging market. 

The announcement comes just as overseas interest in Asian debt markets picks up, as yields in the US and Europe decline. When a new member gets added to a benchmark like FTSE’s US$30 trillion (RM128.57 trillion) World Government Bond Index (WGBI), global funds tracking the gauge need to buy that country’s debt.

Even so, the green light for Seoul is something of a surprise after Morgan Stanley and Goldman Sachs Group Inc flagged the risk of a delay due to slow uptake of reforms.

“This development is expected to have a positive impact on the South Korean financial markets,” with the belly of South Korean rates rallying 10 basis points to 20 basis points, said Kiyong Seong, the lead Asian macro strategist at Societe Generale SA, referring to medium-term bond yields.  

FTSE Russell commended both South Korea and India on the steps taken to improve access for foreign investors. Officials in Seoul keenly pursued inclusion in the WGBI, extending trading hours for the won and making it easier for overseas investors to settle trades via Euroclear. 

Accession is expected to attract US$56 of inflows, according to the Finance Ministry in Seoul. 

South Korea’s weighting in the WGBI is projected to be 2.22%, after it gets phased in on a quarterly basis over a one-year period from November 2025. 

India’s government, by contrast, kept a lower public profile. While joining flagship indices can attract global funds, it can also pose risks to emerging economies frequently buffeted by capital outflows. 

South Korea will “carefully monitor” both the bonds and the currency market to ensure there’s no volatility in response to FTSE’s announcement, a Finance Ministry official told Bloomberg. 

Yet with Russia under sanction due to its invasion of Ukraine, emerging-market investors have been almost uniformly bullish on India’s debt and pushed for its inclusion in benchmarks.

India’s debt will be added to the FTSE’s US$4.7 trillion emerging-market bond index as of next September over a six month period, with a final share of 9.35%. That will be the second-highest after China. 

The world’s fastest-growing major economy already joined JPMorgan Chase & Co’s widely followed emerging-market gauge in June to great fanfare despite being regarded as a reform laggard. 

India’s index-eligible bonds have drawn more than US$14 billion of inflows this year. It’s due to join Bloomberg’s local currency government bond index in January. 

Bloomberg LP is the parent company of Bloomberg Index Services Ltd, which administers indices that compete with those from other service providers.

Source: The edge markets

Impact of the RBNZ's Recent Rate Cut

RBNZD Rate Decision

Shifts in RBNZ’s Policy Approach

OCR RBNZ

Market Expectations for Future Rate Cuts

Economic Rationale Behind the RBNZ’s Decisions

Comparison with Other Central Banks

External Influences on the NZD

Broader Market Sentiment and Global Factors

Senior economists and think tanks have urged the Chancellor of the Exchequer Rachel Reeves to introduce an “exit tax” on the wealthy to raise as much as £500 million (RM2.8 billion) a year and discourage departures.

Rich entrepreneurs and investors in the UK are currently able to move overseas for tax purposes before cashing in capital gains, with as many as three quarters re-domiciling in havens where they pay no tax at all, according to a report from the Centre for the Analysis of Taxation. Such a policy — which Australia, Canada and the US already have — would reduce incentives for wealthy individuals to emigrate in response to other tax changes, the group said.

CenTax’s analysis of Companies House data showed that there was an outflow of £5.1 billion in shareholder value in the year to April 2024 as UK nationals moved overseas. That amounted to “at least £500 million in foregone capital gains tax revenue,” it said.

The proposal from CenTax’s Arun Advani, Andy Summers and Cesar Poux follows similar suggestions from the Institute for Fiscal Studies and the Resolution Foundation, and comes as Reeves seeks to close a mid-year deficit of £22 billion without scaring off Britain’s wealth creators. 

Some high-net-worth individuals are considering relocating from the UK, prompting Reeves to consider watering down her plans for wealthy “non-dom” foreign residents in the UK. Such tax changes and a “hostile culture for wealth creators” could cause the share of millionaires in the British population to fall to 3.62% by 2028 from 4.55% now, the Adam Smith Institute estimated in a new report based in part on UBS/Credit Suisse wealth reports.

Reeves hasn’t ruled out a potential increase in the CGT, which is currently set at 20% on most assets, when she unveils her first budget on Oct. 30.

“We are addressing unfairness in the tax system, so we can raise the revenue to rebuild our public services,” the Treasury said in a statement. “That is why we are removing the outdated non-dom tax regime and replacing it with a new internationally competitive residence-based regime focused on attracting the best talent and investment to the UK.”

Other countries that charge capital gains tax on emigrants include Denmark, Finland, France, Germany, Ireland, Japan, Luxembourg, the Netherlands, Norway, South Africa, Spain and Sweden. In France, the rate is 30%, Germany discounts some of the gains for an effective rate of 27%, and the US charges it at between 20% and 30%. Within the Group of Seven, Italy is the only country other than the UK that doesn’t have an exit tax.

“Charging CGT on people who leave the UK is not about punishing them for leaving,” said Andy Summers, director of CenTax and associate professor at the London School of Economics. “It’s simply saying, ‘You need to pay your bill on the way out.’ Most of the UK’s international peers already do this, and there is no reason why the UK couldn’t, as well.”

While critics of the proposal say it could deter wealth creators from basing themselves in the UK, even tax experts argue that it would be a preferable reform to other CGT changes. The Liberal Democrats proposed raising £5 billion a year by reforming CGT in their election manifesto.

David Lesperance, founder of international tax advisory firm Lesperance & Associates, told Bloomberg that he had seven clients with a “significant amount” of unrealised capital gains. “They are going to put themselves in a position to claim UK non-residence before Oct. 29, should an exit tax (worst-case scenario) be applicable for anyone who becomes non-resident after that date,” Lesperance said in an email. 

CenTax’s proposal would “rebase” the value of the asset on arrival to ensure any tax was charged purely on the capital gains while the individual was in the UK. The government could also target it at the very rich by exempting anyone with gains below £1 million. The research found that the top 10 wealthiest leavers each year account for 73% of potential revenue.

In the year to April, three-quarters of the gains came from just 10 people with shareholdings worth over £4 billion, said Poux, CenTax.

Source: The edge markets