Portfolio managers have observed an interesting relationship over the past three months: Stocks and bonds have exhibited the strongest positive correlation this century. While far from an iron-clad indicator, the bond yield ratio suggests that investors are legitimately concerned about inflation.
The data certainly backs this up. Annual inflation in Canada and the United States has reached multi-year highs; indirect measures such as shipping costs from Asia to Europe also reached peak levels this past month.
It therefore comes as no surprise that investment advisors, portfolio managers and wealth professionals are increasingly shifting focus to alternative assets. This broad category of investable assets is designed to provide additional options for enhancing returns and income levels when compared with traditional stocks and bonds. As alternatives surpassed $10 trillion in global assets under management, much of the fear and skepticism towards the asset class has faded—and for good reason.
At CMI Financial Group, we’re singularly focused on private mortgages as an asset. Although private mortgages are often grouped with real estate for the purpose of categorizing alternative investments, investing in mortgages is an entirely different process than seeking traditional exposure to residential properties through ownership. Mortgages do provide direct exposure to real estate markets but do so from the perspective of a mortgage lender. Private mortgage products typically provide higher rates of return than conventional fixed-income securities — without the risk of homeownership.
MICs: Streamlined Access to Private Mortgages
Mortgage Investment Corporations, or MICs, are perhaps one of the easiest ways to gain exposure to the private mortgage market. The rationale for investing in MICs is clear: Structural shifts in mortgage lending practices have created higher demand for private lenders. MICs pool investment funds from individuals for the purpose of investing in private mortgages. The MIC is managed by a professional team of administrators and underwriters who carefully select mortgages that meet the risk and capital profiles of their investors. The MIC generates income through the collection of fees and interest charged to the borrowers.
Investors and wealth advisors should conduct the same due diligence for selecting MIC funds as they do for mutual funds, exchange-traded funds or any other asset that’s incorporated into client portfolios. The experience of the fund manager, their assets under management and track record in meeting investment objectives are just some of the criteria advisors should consider. Funds that employ sound risk management and adjudication practices also stand out in the long run.
Working With CMI
With more than $700 million in successful mortgage placements across Canada, CMI Financial Group has been a pioneer of private mortgage investing for more than a decade. Invest with confidence knowing that you have an award-winning, industry-leading team of mortgage experts managing the entire investment process for you.
At CMI, our integrity is your integrity. Speak to a CMI advisor to learn about our MIC investment options.