Deer Park Road Management has launched its second mortgage opportunity fund as elevated interest rates and spread dislocation create pricing inefficiencies in the market.

Deer Park Mortgage Opportunity Fund II (MOF II) is a closed-ended vehicle investing in residential mortgage-backed securities (RMBS).

The fund builds on MOF I, which launched in January 2024 with $168m (£123.9m) of capital commitments and is due to reach the end of its investment period in June 2027.

The alternative asset manager said reduced investor participation and elevated interest rate volatility had weighed on non-agency RMBS valuations, creating “attractive entry points” across the broader non-agency RMBS universe, including newer mortgage securitisations with distinct collateral characteristics and transaction structures.

“We are excited to launch the Deer Park Mortgage Opportunity Fund II at what we view as one of the most compelling risk-adjusted opportunities in structured credit in recent years,” said Scott Burg, chief investment officer and managing partner of Deer Park.

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“Higher mortgage rates and an increasingly diverse mix of collateral and transaction structures have created pricing inefficiencies in non-agency RMBS that we believe can be captured through disciplined, loan-level credit work.”

Based in Steamboat Springs, Colorado, Deer Park is an alternatives manager specialising in structured credit, with around $2.5bn in assets under management.