April 8 2010 by Ellen Roseman
Although interest rates are close to zero, you can still earn higher returns on higher-risk interest investments. Recently, I did a column about Romspen Mortgage Investment Fund, which says at its website that it has generated consistent returns of about 10 per cent a year.
The fund invests in commercial mortgages that banks don’t generally handle. It’s open only to accredited investors and doesn’t have to issue a prospectus, as mutual funds do. There’s no market for the units, since they’re not listed on a stock exchange.
But I didn’t realize how the lack of liquidity played out in the months following the 2008 stock market crash. A financial adviser told me that his client had tried to redeem units and couldn’t because everyone else wanted to do the same thing. That made me press company spokesman Wes Roitman for more details — and he happily obliged.
You can read the questions below from Ken Hawkins, the adviser, and Romspen’s response. It’s clear that the double-digit returns on a private mortgage fund may cost you dearly if you expect ease of cashability in an emergency.