Some 100 firms applied for the role. The chosen nine are: Alliance Bernstein, with sub-advisers Greenfield Partners and Rialto Capital Management; Angelo Gordon and GE Capital Real Estate, which are partnering; BlackRock; Invesco; Marathon Asset Management; Oaktree Capital Management; RLJ Western Asset Management; Trust Company of the West; and Wellington Management Co.
With these selections in place, the market will finally get a sense of one of the program's missing pieces: its eventual financial capacity. The nine fund managers have three months to raise $500 million in capital each from private investors. Treasury is matching that equity as well as providing debt financing up to 100% of the total equity raised. The fund managers have the option of raising more than $500 million, but there is no assurance that Treasury will match amount over that threshold.
Even before the fund-raising begins, however, it is clear that PPIP will not have the same appetite as its original unveiling suggested. Now the plan is expected to buy as much as $40 billion in assets; original projections suggested it would have to take on as much as $1 trillion. Treasury will invest up to $30 billion in the program--an amount much smaller than the $100 billion the Obama administration initially envisaged.
An improving economy and--perhaps more importantly--a financial system that appears to have stabilized--has played a role in PPIP's scale down. Indeed after the stress test results were announced earlier this year, talk emerged that PPIP would be quietly shelved or its mandate rejiggered. Instead, as it turned out, Treasury scaled it down considerably to reflect the changing environment.
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