One of the real attractions of this investment is it doesn’t correlate closely with equity and most bond markets, and whether equities or real estate go up or down, it essentially doesn’t matter:" Bayard Closser, President, Vertical Capital
Irvine, CA (PRWEB) December 19, 2011
Believing that low prices on mortgage loans represent value to investors in the current environment, Vertical Capital Markets Group today announced the launch of the Vertical Capital Income Fund.
The Fund’s goal is to build a portfolio of quality mortgages that aims to provide income and growth potential to investors. Designed for investments of $1,000 and up, the fund follows the lead of Vertical’s prior offerings and invests primarily in assets of residential performing loans that are secured by first mortgages or deeds of trust.
Group president, Bayard Closser, said, “One of the real attractions of this investment is it doesn’t correlate closely with equity and most bond markets, and whether equities or real estate go up or down, it essentially doesn’t matter. Through this structure, the fund will own the underlying collateral in the event of a loan default.”
A study by BlackRock Investments, LLC for the period 2001 through 2010 found that the benchmark index for the Vertical Capital Income Fund, the Barclays Capital US MBS Index, has a -0.18 correlation with the S&P 500. A correlation of 1.00 represents an absolute positive correlation between two asset classes, while a correlation of -1.00 represents an absolute negative correlation.
The Fund can potentially reduce risk for investors by increasing diversification, because it has a negative correlation with stocks and other investments. However, no level of diversification can ensure profits or guarantee against losses. Furthermore Vertical is purchasing the loans at a significant discount, so the collateral backing the loans is typically worth more than what Vertical pays for the loans and this is verified with an independent assessment.
In addition, Vertical projects that more than 90% of the loans in the fund are performing loans, and this provides ample room to negotiate lower payments for any troubled homeowners.
“Despite high unemployment and lost home equity, the vast majority of homeowners are still putting their mortgage payments first among the bills they have to pay,” Altuzarra said, adding that Vertical is making headway in its socially responsible goal of “keeping people in their homes.”
Founded in 2004, Vertical Capital underwrites, monitors, and services the loans the firm purchases. The principals have more than 60 years of combined experience in the mortgage banking industry. With its network of relationships, Vertical strives to provide moderate, non-correlated products to investors. “Managing loan portfolios is sophisticated,” CEO Gus Altuzarra said. “We believe that to succeed in this arena, you need experts like Vertical in this highly specialized marketplace. Our wide network of contacts within the banking industry allows us to uncover mortgage loan opportunities that other buyers likely would not find. As loan servicer, Vertical Capital also has access to information not readily available to most institutional investors.”
The S&P 500 Index is an unmanaged composite of 500 large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. You cannot invest directly in an index.
The Barclays Capital U.S. MBS index measures the performance of investment grade fixed-rate mortgage-backed pass-through securities of GNMA, FNMA, and FHLMC.
Mutual Funds involve risk including the possible loss of principal. There is a risk that issuers and counterparties will not make payments on securities and other investments held by the Fund, resulting in losses to the Fund. In general, the price of a fixed income security falls when interest rates rise. A specific security can perform differently from the market as a whole for reasons related to the issuer, such as an individual's economic situation, the Fund's net asset value may be more volatile because it invests in notes of individuals. The Fund is a closed-end investment company with no history of operations. Securities may be subject to prepayment risk because issuers are typically able to prepay principal. The Fund will not invest in real estate directly, but, because the Fund will invest the majority of its assets in securities secured by real estate, its portfolio will be significantly impacted by the performance of the real estate market and may experience more volatility and be exposed to greater risk than a more diversified portfolio. Quarterly repurchases by the Fund of its shares typically will be funded from available cash or sales of portfolio securities. The sale of securities to fund repurchases could reduce the market price of those securities, which in turn would reduce the Fund's net asset value.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Vertical Capital Income Fund. This and other important information about the Fund is contained in the Prospectus, which can be obtained by calling 1-866-277-VCIF (866-277-8243). The prospectus should be read carefully before investing. The Vertical Capital Income Fund is distributed by Northern Lights Distributors, LLC member FINRA. Vertical Capital Markets Group, LLC is not affiliated with Northern Lights Distributors, LLC. 2621-NLD-12/12/2011