the manager of the Fund’s
interests are aligned. One way
is for the Fund to participate in
the points being charged to
the borrower. This lends itself
to make sure the manager
does not charge a large
amount of points [which the
manager could retain] and a
small interest rate [which is
paid to the Fund].
compounding the yield. With light for the loan, the broker
an individual mortgage, the informs the investor that he
lender has to take the was too late and some other
monthly payments with no investor snapped up the
reinvestment allowed. In loan. This creates a
addition, a Fund allows for frustrating situation for the
diversification because the investor and wastes his time.
Fund has many mortgages, At some point, the investor
similar to a mutual fund may tell the broker to stop
holding a variety of stocks. sending him deals, as he
Because this type of never knows if he will be
investment is no longer a allowed to invest in the
secret, many individual specific loan [because
investors are competing for another investor was faster
mortgages. When a broker in saying, “yes”].
Although shortterm
mortgages and mortgage
Funds are not the “end all”
investment, they may play a
prominent place in many
investment portfolios looking
to provide high yields for
relatively low risk and the
potential availability for some
liquidity. Preservation of
principal is a key role for many
clients, and advisors would be
smart to consider shortterm
mortgages for their clients.
presents a potential scenario
to an investor, that broker Many investors choose to
usually also sends the same invest in a Fund to avoid
scenario to many other those disappointments. In
potential investors, as the addition, many Funds
broker wants to make sure provide a liquidity feature, so
that he can fund the loan in a the investor can withdraw his
timely fashion to the money if he needs to.
borrower. Many an investor Advisors should look for
has gotten upset when, after Funds that charge no load to
giving the broker the green get in or out and make sure
Edward Brown is in the
Investor Relations department
at Pacific Private Money in
Novato, CA
4158832150
www.pacificprivatemoney.com