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Why Mortgage Funds are a Growing Asset Class

Updated: Feb 14

In the past few years, mortgage investing has become increasingly popular and this includes mortgage funds. Mortgage funds have provided stable returns to investors, allowing them to participate in the real estate market without directly owning or managing properties. Passive investors can diversify their portfolios without the higher risks associated with the stock market.

Mortgage funds are a managed investment in which capital is gathered from passive investors, which is pooled and lent as mortgages to borrowers who want to purchase property. Investors receive quarterly distributions as the fund generates returns when borrowers make monthly loan payments. Here are three reasons investors are turning to mortgage funds:

  • Diversification: Mortgage funds invest in a portfolio of multiple mortgages and properties. Unlike a direct investment, this pooled structure protects investor capital from losses, creating more stability by balancing out risk and return.

  • Income Generation: A main appeal of mortgage funds is the ability to generate steady income. This becomes even more favorable in the current higher rate environment since borrowers are paying more interest, which can mean larger returns for investors.

  • Lower Market Volatility: Mortgage funds are generally more stable than investing in the stock market. Many mortgage investments earn above-market, risk-adjusted average annualized returns compared to stocks.

Mortgage funds are attractive to passive investors seeking steady income secured by tangible real estate assets. They can be a solid choice for investors looking for fixed-income investments. Contact us to find out if mortgage funds align with your investment goals.


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