E1 Capital is a diversified U.S. mortgage opportunities strategy from Dundon Advisers, the New York-based credit investment and advisory firm founded in 2016. The strategy’s Chief Investment Officer, Victor Baev, has spent more than two decades investing across nearly every part of the U.S. mortgage market, including buy-side years at Pine River Capital Management and Two Harbors Investment Corp. that carried him through cycles from the post-crisis recovery to COVID. Baev describes Dundon E1 as the natural next chapter of that career, pairing the playbook he refined over that span with Dundon’s ten-year track record in credit.
The strategy invests across agency MBS, non-agency RMBS, residential whole loans, CMBS, and mortgage REITs, allocating dynamically among the five sectors as relative value and macro conditions shift, and is preparing to launch with a target raise of $300 million across commingled, fund-of-one, and SMA structures.
Pulse 2.0 interviewed Dundon E1 Capital Chief Investment Officer Victor Baev to learn more.
Victor Baev’s Background
Could you tell me more about your background? Baev said:
I have spent over 20 years investing across the U.S. mortgage market, including agency MBS, non-agency RMBS, CMBS, residential whole loans, securitization, and the related derivatives and rates products that surround them. My career has taken me through nearly every part of the value chain, from structuring and trading on the sell-side to managing large portfolios on the buy-side.
I started on Wall Street in 1997 at Barclays Capital, working on structured credit and interest rate derivatives, and then moved to Dresdner Bank as a structurer in debt capital markets and interest rate derivatives. After completing my MBA at Columbia Business School, I joined Credit Suisse as a trader, where I spent five years trading agency CMOs, agency mortgage derivatives, non-agency RMBS, whole loans, and securitization. That gave me a real foundation in how the plumbing of the mortgage market actually works.
In 2009 I joined Pine River Capital Management and became part of the team that helped build and externally manage Two Harbors Investment Corp. from its early years. I spent three years managing a distressed non-agency RMBS portfolio in the Pine River Fixed Income fund, and then seven years as a portfolio manager focused on non-agency RMBS, CMBS, whole loans, and conduit strategies at Two Harbors. That was a multi-cycle experience, managing through the post-crisis recovery, the taper tantrum, the rate normalization period, and ultimately COVID. It is one of the very few seats in the market where you get to invest across the entire mortgage credit stack at scale.
Today I am a Managing Director at Dundon Advisers, where I am leading the launch of our new mortgage and real estate investment strategy as Chief Investment Officer of its Dundon E1 Capital strategy. Dundon E1 is the natural next chapter, combining the playbook I have refined over two decades with Dundon’s broad and diversified ten-year track record in credit, to build what I hope will be a leading diversified mortgage opportunities strategy.
Evolution Of The Firm’s Thesis
How has your firm’s thesis in this market evolved over time? Baev noted:
Dundon began to develop the strategy in 2024, animated by a long-standing understanding that the U.S. mortgage market offers an investor consistently mispriced optionality around prepayment, default, and loss recovery and vastly more size and liquidity than is available in other credit markets that might be prone to similar mispricing.
Our initial focus was opportunistic real estate and credit positioning, leveraging the firm’s distressed and restructuring expertise. With the Fed winding down its MBS portfolio, banks stepping back as dominant buyers, and the GSEs re-emerging through programmatic buying and renewed talk of privatization, the opportunity set has broadened dramatically. We have moved toward a holistic, multi-sector approach that spans agency MBS, non-agency RMBS, residential whole loans, CMBS, and mortgage REITs, with dynamic allocation between them based on relative value and macro conditions.
The other meaningful evolution is on the analytics side. We see significant benefits in machine learning, alternative data, and loan-level prediction modeling. The mortgage market generates an enormous amount of structured data, and managers who can interpret it faster and more rigorously than the broader market will have a durable edge. That is increasingly central to our thesis.
Favorite Memory
What has been your favorite memory working for your firm so far? Baev reflected:
One of the most rewarding aspects of building Dundon’s E1 Capital mortgage strategy has been seeing it take shape from the ground up. Building an institutional investment strategy is a multi-year endeavor, and a particularly satisfying part of the process has been developing the investment framework, refining the opportunity set, and engaging with senior investment professionals whom I have known and respected for years. Those conversations have reinforced the depth of the opportunity across agency MBS, residential mortgage credit, CMBS, securitization, and portfolio construction, and have helped shape the type of team and culture we want to build at launch. The goal is to bring together professionals with deep cycle-tested experience, strong technical judgment, and a shared investment discipline. Seeing that vision become more concrete has been one of the highlights of the journey so far.
I would also point to the institutional-level framework that we have built on the operating side. Paul Weir joined us as Chief Operating Officer after nearly three decades in the industry, most recently as Chief Operating Officer for both BNY Investor Solutions and BNY Advisers, with prior senior operations roles at First Eagle Investments, Western Asset Management, and Pacific Life, as well as significant prime brokerage experience in Europe and Asia, including founding Bear Stearns’ fixed income prime brokerage in Europe and Citi’s equity offering in Singapore. Anthony DeFeo joined to lead business development after raising over $1 billion across prior roles in private credit and alternatives. And none of this would be happening without Matt Dundon’s vision in building the broader Dundon Advisers platform and giving us the runway to launch the right way. Watching the platform come together piece by piece, with that caliber of operational, business development, and strategic support, has been the favorite part of this chapter for me.
Significant Milestones
What have been some of your firm’s most significant milestones? Baev cited:
Matt Dundon formed Dundon in February 2016, after spending six years as a credit portfolio manager at Pine River Capital and Advent Capital Management. Identifying opportunities in credit assets and exploiting them for the benefit of its clients has been the firm’s mission from the first day to the present day. The firm meets the acid test for long-term success: consistent growth in revenue and headcount – never a down year in over a decade by either measure.
Before 2016 was over, the firm had critical creative wins in Bankruptcy Court, which established a baseline for increasing and realizing the value of certain classes of distressed litigation assets. In 2018, the firm generated the first single-trade eight-figure PNL in this strategy, and between 2021 and 2022 hit a peak with hundreds of millions of value generated across dozens of COVID-era defaults.
In 2017, the firm identified an opportunity to broaden its reach from the management of esoteric distressed assets into fee-based advisory services for groups of holders of distressed assets (esoteric and not) and accordingly began to build a restructuring advisory practice in parallel with, and animated by many of the core competencies of, its distressed asset business. By 2019, that business was at the top of the deal-count league table for advice to creditor committees and has been in the top three every year since.
Other key milestones include building out the senior investment and operations team, finalizing our prime brokerage relationship with JP Morgan, partnering with Apex Fund Services as administrator and middle office provider, and opening our second office in South Florida in addition to our new headquarters at 565 Fifth Avenue in New York. We are now in active dialogue with seed and anchor investors as we prepare to launch the Dundon E1 strategy across commingled, fund-of-one, and SMA structures.
Investment Success Stories
Would you like to share any specific investment success stories? Baev highlighted:
I generally prefer to discuss investment successes in terms of the process and insights that created them rather than focusing on individual returns. Two areas stand out and continue to shape the investment philosophy behind Dundon E1.
The first was investing in non-agency RMBS during the years following the financial crisis on behalf of Pine River’s hedge funds and the mortgage REIT it externally advised, Two Harbors. Many of these securities were trading at significant discounts because the market viewed them through broad categories rather than through detailed collateral analysis. By performing loan-level underwriting, evaluating servicer behavior, housing market dynamics, borrower equity, and cash flow structures, we were often able to identify securities whose expected cash flows were materially better than market expectations. As the housing market recovered and collateral performance improved, many of these investments generated substantial value. Those experiences reinforced my belief that rigorous bottom-up mortgage credit analysis can uncover opportunities that are overlooked by more generalized investors.
The second area was the agency mortgage derivatives market, particularly interest-only (IO) and inverse interest-only (IIO) securities. These instruments embed complex exposure to prepayment behavior, interest rates, and mortgage market technicals. Success often depended on identifying disconnects between market pricing and our proprietary views on prepayments and option-adjusted valuations. The ability to combine quantitative analysis with a deep understanding of mortgage market structure allowed us to identify attractive risk-reward opportunities in securities that many investors either could not analyze effectively or chose to avoid due to their complexity.
What links both of these experiences is a common theme: the most attractive opportunities are often found in areas of the mortgage market where complexity creates inefficiencies. That principle remains central to how we think about investing at Dundon E1 today.
AUM And Other Metrics
Can you discuss total AUM or any other notable metrics? Baev revealed:
Dundon E1 is launching with a target raise of $300 million across vehicles, and I believe the strategy is scalable to over $1 billion without changing our process or risk framework. Our target net return is 800 to 1000 basis points above the risk-free rate, with a 1.2-plus Sharpe ratio and a 6% to 8% two-sigma drawdown limit for instantaneous shocks.
Speaking about Dundon’s asset management capabilities more broadly, the firm has, as noted, extracted hundreds of millions of dollars in returns from complex liabilities, including foreign insurance, mass tort, and class action claims, as well as non-distressed litigation-linked assets. The platform has over 40 staff across our New York and Florida offices. That institutional foundation is part of the reason we can credibly launch with the scale and ambition we have set.
Industry Focus
What are some of the industries that your firm is focused on? Baev pointed out:
Dundon as a whole is industry-agnostic, with a tendency for its activities and managed assets to track broader US default trends. In addition to my expertise in the mortgage market, it also has senior professionals with broad and deep expertise in numerous industries, with non-mortgage real estate, telecom, media, and technology, and mass torts/class actions perhaps most strongly represented.
Dundon E1, of course, invests exclusively in U.S. mortgage markets, but that is an enormous universe. There are roughly $13.5 trillion of residential mortgages outstanding and $4.8 trillion of commercial mortgages. Agency MBS alone is a $9.4 trillion market across Fannie Mae, Freddie Mac, and Ginnie Mae. Non-agency RMBS is roughly $740 billion, residential whole loans are $4.7 trillion, and CMBS is around $1.9 trillion. There is no shortage of opportunity.
Within that, we organize the portfolio around five buckets: Agency MBS, including TBAs, specified pools, and mortgage derivatives. Non-agency RMBS, covering legacy RMBS, GSE CRT, non-QM, single-family rental, RPL, NPL, RTL, second lien, jumbo prime, and agency investor. Residential whole loans across the same credit categories. CMBS, including Fannie DUS, Freddie K, Ginnie Mae, conduit, single asset / single borrower, CRE CLO, and CMBX. And finally, mortgage REITs, where we trade opportunistic equity price dislocations to NAV.
We allocate dynamically across these five buckets based on macro conditions and relative value, with bands of roughly 5 to 40 percent for each strategy and 5 to 10 percent in cash. The breadth is the point. It allows us to pivot toward opportunity and away from risk as the cycle evolves.
Differentiation
What differentiates your Dundon E1 from other firms? Baev emphasized:
A few things differentiate Dundon E1 from peers. First, the breadth of the strategy. Many mortgage funds specialize in one corner of the market, agency-only, or RMBS credit-only, or CMBS-only. We are deliberately multi-sector because the relative value between those sectors is itself one of the most consistent sources of return. Being able to rotate dynamically across the mortgage ecosystem is a real edge. Second, the prospective team. The senior investors on this strategy have worked through market cycles and bring complementary skills in securitized trading, residential whole loans and mortgage servicing rights, and quantitative modeling across MBS, RMBS, CMBS, and consumer ABS, as well as macro and rates expertise. That depth of collaboration is rare in a launch firm. Additionally, Paul Weir brings significant operations experience, having worked on both the buy-side and sell-side through multiple market cycles.
Third, the analytical edge. We have built our process around loan-level performance modeling, machine learning to bridge data gaps, and a real-time data stack that pulls together macro, fundamental, and technical signals. We are also disciplined about what we call scientific skepticism, constantly challenging our own valuations against multi-source trading analytics rather than relying on any single model or single counterparty.
Fourth, the platform. We combine the aggressive, focused posture of a start-up investment team with the institutional infrastructure and support of Dundon Advisers, which has been operating since 2016 with roughly 40 staff across New York and Florida and an extensive real estate business. That mix of agility and institutional support is genuinely uncommon in the launch landscape.
Challenges Faced
What are some of the challenges you faced while working at the firm? Baev acknowledged:
I began to develop this strategy independently, before I joined Dundon, and confronted the fundamental challenge most new managers face: the chicken-and-egg of capital and infrastructure. To attract serious institutional capital you need an institutional platform, and to build that platform you need capital. Dundon provided me that: a built-in support team, track record and resource base that most new managers do not have.
The other challenge has been timing the market environment. Mortgage markets have been through an unusual stretch, with the most aggressive Fed tightening cycle in decades, a regional banking crisis in 2023, and a step change in mortgage rates. We have spent a lot of time making sure our strategy and risk framework are calibrated to today’s environment, not yesterday’s. We expect the next several years, with Fed calibration of monetary policy, potential GSE reform, growth in non-agency mortgages, and the wave of CMBS maturities working through the system, to be unusually fertile for active, multi-sector mortgage managers.
A third challenge, candidly, is simply the time it takes to fully build out and launch a trading strategy. Hiring, technology, service providers, legal documentation, and allocator dialogue all run in parallel.
Future Firm Goals
What are some of your firm’s future goals? Baev emphasized:
In the medium term, we seek to scale the core Dundon E1 strategy portfolio to over $1 billion in AUM without changing our process or risk framework. During that time period, we will explore offering clients for whom it is suitable and attractive vehicles with variant strategies, most likely focused on a subset of the broader mortgage universe in which the core E1 vehicles will invest. These offerings could include dedicated strategies for liquid agency MBS, non-agency RMBS or a mortgage whole loans.
Longer-term, we want Dundon to be recognized as one of the premier specialist managers in U.S. mortgages, the firm that institutional allocators think of first when they want active, diversified mortgage exposure with a real risk framework and a real analytical edge. That is the goal we are building toward.
Additional Thoughts
Any other topics you would like to discuss? Baev concluded:
The macro setup for mortgages right now is genuinely interesting and worth flagging. The Fed is calibrating monetary policy with a renewed concern over higher inflation. GSE reform is being actively discussed in Washington, and the need for housing affordability solutions should expand the opportunity set in non-agency RMBS and residential whole loans. We expect to unlock a new wave of growth in mortgage credit from significant pent-up demand. The scale-back of banks combined with the rise of non-depositor lenders has opened up higher-yielding sectors like non-QM, second-lien, and residential transition loans to private capital. And on the commercial side, higher funding costs, upcoming loan maturities, and the need for fresh capital are creating very real entry points in CMBS as underlying assets reprice through an uneven recovery.
I would also emphasize the diversification story. Agency MBS and mortgage credit are deeply complementary. A hot housing market increases prepayments, which can be a headwind for premium agency MBS but a tailwind for mortgage credit. The large trading volume and liquidity of agency MBS and U.S. rates products offset the potentially longer holding periods of mortgage credit. And policy shifts, whether to bank capital rules or agency guidelines, often create opportunity in one part of the market at the expense of the other. Running both together, with proper hedging and dynamic allocation, is more powerful than running either one in isolation.
For investors who have not focused on mortgages in a while, it is worth a fresh look. The combination of a large addressable market, scalable strategies, and a market structure that consistently rewards fundamental work is exactly the environment our team is built for. We look forward to sharing more as we approach launch.
