Private Credit

Mortgage

The Mortgage strategy seeks to deliver strong long-term total returns while maintaining stability of capital by investing in a diversified portfolio of direct Canadian commercial real estate mortgages. To meet its objective, it focuses on investments that provide predictable and stable income. Stability is derived from the quality of the underlying real estate, the strength—both financial and managerial—of the borrower, and the strength and continuity of rent paid by tenants occupying the mortgaged property.

Key Highlights

  1. Fully integrated alternatives platform: With over 35 years managing both mortgages and real estate, our integrated platform provides an information advantage across the entire real estate life cycle to help reduce risk and improve underwriting

  2. Aligned with client interests: We aim to align our interests with those of our clients and seek to remove potential conflicts of interest by returning all processing fees that are paid by the borrowers to the strategy as income

  1. Relationship-driven execution: Typically, over 90% of the strategy's assets are with repeat borrowers while over 50% of investments are sourced off-market

  2. Internal mortgage servicing: Our internalized mortgage servicing function is an integral component of managing risk in the strategy as it allows us to control the end-to-end mortgage investing and servicing process

Investment Approach

Philosophy: 

We focus on commercial mortgage investments that provide predictable and stable income. We add value by having expertise in real estate as well as the properties that secure mortgages. This enables us to underwrite and structure the loans advantageously for our clients. We use multiple loan types to enhance yield, manage duration and return placement fees to the fund as additional income.

Investment Process

Top-down analysis:

From a top-down perspective, diversification is the key risk control. Ultimately, our goal is to achieve broad diversification by geography, sector and property type, loan type, borrower and maturity, so that no single event can adversely impact the portfolio. Duration and yield curve positioning are actively managed to maximize yield given our economic outlook and interest rate projections.

We use fundamental and technical analysis to monitor the macroeconomic environment for changes in market and industrial trends. Capital flows are tracked and their effect on fixed income and real estate prices are carefully assessed.

Bottom-up analysis: 

We adhere to a robust underwriting process to assess the risk profile of each potential investment opportunity and determine whether it is a good fit for the conservative nature of the portfolio. Each mortgage is reviewed from the bottom-up, starting with a detailed analysis of the underlying real estate, which is further confirmed by a third-party appraisal.

Model:

All investment decisions are placed into a proprietary portfolio modelling system to provide clarity on availability of capital and visibility to any potential compliance issues. The model also provides forecasted diversification and cash flow analysis, allowing us to dynamically focus on investment decisions that help optimize risk-adjusted returns and meet the requirements of the portfolio, both at present and in the future.

Execution:

Our ability to source mortgage investments has been largely the result of the industry relationships developed over  35 years of real asset experience and a demonstrated ability to execute with consistency and integrity. We receive new investment opportunities from the broker community, as well as directly from borrowers. As a result of these strong relationships, over 90% of the portfolio typically reflects repeat business from long-term strategic relationships.

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