Key Takeaways
- • Victor Baev, former Pine River Capital Management portfolio manager and Credit Suisse mortgage trader, is chief investment officer of Dundon E1 at Dundon Advisers Capital, a multi-strategy mortgage credit fund targeting launch in Q1 2027.
- • Dundon E1 will invest across agency MBS, non-agency RMBS, CMBS, residential whole loans and mortgage REITs, combining market-neutral tactical trading with opportunistic deeper-capital-structure positions.
- • Lenders displaced from the shrinking conventional market have shifted into second liens and non-QM loans, with Baev expecting roughly USD180-200 billion of second-lien originations and close to USD200 billion of non-QM originations this year.
- • Non-agency RMBS issuance is projected near USD300 billion in 2026, up from the high-100s to low-200s billion range in recent periods.
- • Baev targets double-digit returns overall, in the low-to-mid teens for liquid tactical trading and the mid-to-high teens for whole-loan securitization.
Summary
According to an Opalesque interview conducted by founder Matthias Knab, Victor Baev is preparing to launch Dundon E1, a diversified mortgage credit fund under Dundon Advisers Capital, with operations expected to begin in the first quarter of 2027. Baev, who traded mortgages at Credit Suisse through the 2008 crisis and later managed non-agency RMBS, CMBS and whole-loan strategies at Pine River Capital Management for more than a decade, describes the fund as a multi-strategy vehicle spanning U.S. mortgage securities and loans.
Baev said the fund combines tactical trading in liquid markets, which is run on a market-neutral basis to capture dislocations, with more opportunistic positions deeper in the capital structure, entered when larger dislocations appear. The fund also has a residential whole-loan strategy in which it acquires loans from mortgage lenders, securitizes them, sells the investment-grade bonds and retains deal equity.
On market dynamics, Baev argued that higher mortgage rates have counterintuitively expanded parts of the non-agency market. While conventional agency originations have diminished, lenders have moved into second liens, which he expects to reach USD180 billion to USD200 billion of originations this year, and non-QM loans, which he expects to approach USD200 billion. Combined, these segments have pushed non-agency RMBS issuance toward USD300 billion this year. He described the agency MBS market, a USD9 trillion segment, as driven by rate volatility that creates wider spreads, and characterized commercial real estate as offering better entry points under higher-rate pressure.
Baev said the fund is organized so that portfolio managers are not confined to single sectors, allowing the team to shift capital toward areas of better relative value, a structure he framed as a response to the siloed approach he observed at Credit Suisse before the crisis. The team will be assembled at launch from former Credit Suisse and Pine River colleagues. Return targets are double-digit overall, with liquid tactical trading in the low-to-mid teens and whole-loan securitization in the mid-to-high teens.
Baev said the fund combines tactical trading in liquid markets, which is run on a market-neutral basis to capture dislocations, with more opportunistic positions deeper in the capital structure, entered when larger dislocations appear. The fund also has a residential whole-loan strategy in which it acquires loans from mortgage lenders, securitizes them, sells the investment-grade bonds and retains deal equity.
On market dynamics, Baev argued that higher mortgage rates have counterintuitively expanded parts of the non-agency market. While conventional agency originations have diminished, lenders have moved into second liens, which he expects to reach USD180 billion to USD200 billion of originations this year, and non-QM loans, which he expects to approach USD200 billion. Combined, these segments have pushed non-agency RMBS issuance toward USD300 billion this year. He described the agency MBS market, a USD9 trillion segment, as driven by rate volatility that creates wider spreads, and characterized commercial real estate as offering better entry points under higher-rate pressure.
Baev said the fund is organized so that portfolio managers are not confined to single sectors, allowing the team to shift capital toward areas of better relative value, a structure he framed as a response to the siloed approach he observed at Credit Suisse before the crisis. The team will be assembled at launch from former Credit Suisse and Pine River colleagues. Return targets are double-digit overall, with liquid tactical trading in the low-to-mid teens and whole-loan securitization in the mid-to-high teens.
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