Unlocking the Potential: How Adding Mortgage Exposure Can Enhance Your Investment Portfolio

A Mortgage Investment Entity (MIE) refers to an investment vehicle that specializes in investing in mortgages. MIEs can take various forms, including Mortgage Investment Corporations (MICs), Mortgage Investment Trusts (MITs), Limited Partnerships (LPs) or other structured investment vehicles. 

The Alitis Private Mortgage Fund pools funds from multiple investors and use those funds to invest in a portfolio of MIEs, mortgages or publicly-traded mortgage-related securities. Mortgages can be residential or commercial and are typically provided to borrowers who do not meet traditional mortgage guidelines from banks or credit unions. These borrowers can include new Canadians, small business owners, developers, divorcees etc. Investing in mortgages can be a beneficial addition to a diversified investment portfolio. 

Key Benefits:

  • Regular Income

    Investing in mortgages can provide a steady stream of income through interest payments which are distributed to investors. Mortgages with a fixed interest rate means that investors can expect a consistent return on their investment over the life of the mortgage.  

  • Diversification

    Investing in mortgages can provide diversification benefits to a portfolio. Mortgages are typically considered to be a lower risk investment, as they are backed by real estate. By investing in a portfolio of mortgages, investors can spread their risk across multiple properties and borrowers, which can help to mitigate the impact of any defaults. 

  • Inflation Hedge

    Mortgages can also provide an inflation hedge. As inflation rises, the value of the underlying real estate typically increases, which can result in higher property values and higher mortgage payments. As well, many mortgages have variable rates which tend to increase as inflation increases.  This can help to protect the purchasing power of an investor’s income stream. 

  • Real Estate Exposure

    Investing in mortgages can provide indirect exposure to the real estate market without the hassle and expense of owning physical properties. This can be particularly attractive for investors who may not have the resources or expertise to manage properties directly. 

  • Tax Advantages

    In Canada, investing in mortgages can offer tax advantages. For example, interest income from mortgage investments held in a registered retirement savings plan (RRSP) or tax-free savings account (TFSA) is not subject to tax. This can help to increase the after-tax returns on the investment. 

How is the Alitis Private Mortgage Fund managed?

The Alitis Private Mortgage Fund investment strategy combines three different approaches to mortgage investing into one package: 

  • Private Mortgage Investment Entities – We start with a core of institutional and best-in-class private mortgage offerings to create a diversified foundation to mitigate risks. 
  • Publicly-Traded Mortgage Investments – We strive to enhance returns by trading in public mortgage securities when their valuation is favourable compared to private mortgages. Public securities also provide further liquidity for the fund. 
  • Direct Mortgages – We invest directly into specific mortgages to customize exposure, manage risk and enhance returns. 

Speak with a Portfolio Manager today.

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