UPDATE 1-Ex-Lehman exec to lead D.E. Shaw ABS investments

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NEW YORK, Sept 2 (Reuters) - Richard McKinney, the former head of securities supported by assets such as subprime mortgages at Lehman Brothers Holdings Inc., will oversee a new asset-backed bond investment unit at D.E. Shaw Group, D.E. Shaw said on Tuesday.

McKinney will work with Rocky Kurita, a former managing director and asset-backed securities trader at Deutsche Bank AG, who joined the New York-based investment firm as a senior vice president in July, D.E. Shaw said in a statement.

Lehman Bros LEH.N has been scaling back its business of originating and packaging home loans into ABS, which have produced heavy losses for investors amid the deepest housing downturn since the 1930s.

Distressed prices on the bonds and a vast disparity of opinion on what the securities are worth has created buying opportunities for funds that have amassed billions of dollars for purchases. However, bargain hunters have failed to put a floor under prices, creating a treacherous environment for the funds, analysts said.

"The asset-backed securities markets are fundamentally changing as a result of the excesses of the past few years," Max Stone, a member of D.E. Shaw's executive committee, said in the statement. McKinney, a managing director, and Kurita will invest in a broad range of ABS, he said.

D.E. Shaw said it had about $39 billion in investment and "committed capital" as of July 1.

McKinney managed various trading groups in mortgage and other asset-backed areas at Lehman for 15 years, D.E. Shaw said. Kurita has traded ABS for 14 years, it said. (Reporting by Al Yoon; Editing by Tom Hals)