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Risk Mitigation With a Fixed Income Fund
Operating Strategy & Risk Mitigation
The Fixed Income Fund manages risk utilizing a number of techniques and tools.
At Tactical Wealth, we always have the safety of our investors’ money and principal in mind when purchasing mortgage and trust deed loans.
Below are a few of the strategies we employ when carefully selecting our holdings in order to provide peace of mind along with a stable monthly income:
Pooled Investments
Participating in a fund that holds many loans diversifies the risk of single loan defaults.
The Fixed Income Fund pools the investments of all our clients, as well as the capital invested by our manager, in order to create a more risk-averse, high return investment.
The Tactical Wealth Fixed Income Fund diversifies its real estate holdings by property type and location to address market risk, maturities to address interest rate risk, and borrower type to address payer class risk.
Targeted Markets
The “tactical” behind the Tactical Wealth Fixed Income Fund means we aim to acquire loans that are beneficial to our overall operating strategy.
The Fixed Income Fund manages this by targeting loans backed by single-family residences that meet the average property transaction standards for the area. For example, in Houston, we target homes with a value between $180,000-$250,000.
That way, if we need to foreclose on a loan and sell the home to recover our capital, this technique helps ensure we are hitting the largest market segment with the most potential buyers.
Loan-To-Value Ratios
The maximum loan-to-value ratio on the holdings acquired by the Tactical Wealth Fixed Income Fund is 70 percent.
This means the market value of the properties serving as loan collateral must exceed our loans by at least 30 percent. For example: For every loan investment of $200,000, there is a collateral asset value of least $285,715, providing a buffer against loss of $85,715.
Contingency Reserve
The Fixed Income Fund has established a contingency reserve to cover additional legal expenses that secure the fund’s interests in non-performing loans, including foreclosure proceedings.
In addition, the contingency reserve will be utilized to continue investors’ monthly payments in the event of loan default. This will help ensure that investors can depend on receiving stable monthly payments consistently.
Concentrated Holdings
The Fixed Income Fund concentrates on acquiring holdings in the most favorable foreclosure jurisdictions, such as in Texas, where you can initiate foreclosure proceedings in a 21 day period.
These areas are more favorable than other states, such as New York, which requires a 445 day period.
Concentrating in Texas helps the Fixed Income Fund recover capital quickly from non-performing loans and re-allocate it to start generating cash flow.
Contact Tactical Wealth today to learn more about the Fixed Income Fund risk mitigation and strategy.