Schultz Financial Mgmt Corp

Risk-Controlled Portfolios for Serious Investors

Trust Deed Fund 

Objective

For the "core" portion of our client's portfolio allocated to bond, we may invest in a private mortgage fund or funds.   These funds generally consist of many short term commercial loans that are backed by real estate.  These loans may be for new construction, renovation, small commercial properties, land, mixed use properties, and  other special use properties.

Typically these private mortgage funds will maintain a stable net asset value.  However, it is possible a borrower within the fund could default on a loan and force a foreclosure sale.  In that case, if the foreclosure process does not result in a recovery of  the full principal value of the loan, a reduction in the net asset value of the fund would occur.

The objective of this investment is to add diversification and stability to the overall portfolio while providing attractive returns in the range of 9-11% per year.  

Investment Approach

These mortgage funds are not SEC regulated securities and do note trade on regulated exchanges.  Instead these are structured as LLCs and managed by firms that specialize in commercial mortgages.  These funds have additional suitability requirements and for investors and are not available to all clients.

Further, these funds cannot provide immediate liquidity, but rather provide investors with the opportunity to redeem shares on a monthly basis, subject to the amount of cash the fund has available for redemptions  after redemptions for earlier requests, if any are made by other investors in the fund.   It is generally recommended that investors have the intention of remaining in the fund for 2 years or more, before committing funds to this investment.

Because the income from these funds are taxed as ordinary income, we generally recommend purchase of these types of fund shares in IRA accounts.