Find out how Antrim Balanced Mortgage Fund, Canada’s largest residential MIC, leverages both inflationary and recessionary market conditions to deliver a stable, fixed income solution
Unprecedented market volatility, protracted inflation, and aggressive interest rate hikes have prompted many investors to seek out asset classes that offer stability, security, and reliable access to their funds.
“We have never had a negative rate of return and we’ve never gated our funds,” says Will Granleese, Director, Portfolio Manager at Antrim Investments. “In my opinion, this is one of the best fixed income alternatives in Canada right now.”
Antrim Balanced Mortgage Fund is Canada’s largest residential mortgage investment corporation (MIC.) Now in its 50th year, it remains a steady stalwart in the lender/broker space. Antrim sticks to a diversified portfolio of residential first and second mortgages in major Canadian centres to preserve capital while generating a regular stream of income.
The company lends to individuals who don’t meet the bank’s strictly imposed guidelines. This includes self-employed, stated-income, and low-beacon professionals. “We lend at a slightly higher rate so clients can meet their real estate goals and our shareholders can meet their investment goals,” says Granleese.
With Antrim’s intentional focus on the residential market their clients are protected against less liquid, less reliable higher loan-to-value mortgages. “We provide the stability everyone is looking for,” says Granleese. “We don’t get into trouble like some other higher loan-to-value lenders because we work with the very safest mortgages.”
Stability, security, and growth
Antrim is on the shelf at 15 IIROC dealers in Canada. Fund assets as of Sept. 2022 amount to $954,000,000.
The company differentiates itself by prioritizing swift approval turnarounds and working alongside a team of highly experienced underwriters. They’re judicious about their property choices and limit timeframes to mitigate risk.
“We lend on the most desirable houses in the most desirable locations – the properties everyone wants to lend on. Borrowers tend to stay with us for about two-and-a-half to three years to pay off the loan, and then they head to the banks for a lower rate.”
The formula is simple. Antrim lends up to a maximum of 75 per cent on the first million of a home’s appraised value, and 60 per cent on anything over that threshold. After one year, borrowers can renew their mortgages for another year term.
Inflation vs recession
During inflationary markets, Antrim’s investments are at their best. “If the stock market goes down, it doesn’t affect Antrim at all. And as interest rates increase, so do our distributions,” says Granleese.
Should interest rates impact housing prices, Antrim is positioned to weather the correction. A conservative lending approach tempered by their portfolio’s prudent 59 percent weighted average delivers the reliable distributions their investors are after.
“These next 12 months will probably pay 6 ¾ per cent and the next year, 7+ per cent. Covid-19 shattered mortgage rates but we’re climbing back up to the 8 per cent we’ve been averaging for over 30 years,” says Granleese.
During recessionary markets, Antrim is equally poised to perform. “During a recession people look for second mortgages,” says Granleese, noting those “beautiful second mortgages” deliver in spades.
“A house that’s worth $1.5 million might follow a first mortgage of $800,000 with a $200,000 second. The exposure on the house is $1 million, and the probability the house will drop from $1.5 million to $1 million is very unlikely. Meanwhile, we’re charging 10 per cent on that second mortgage,” he says.
A good return by all accounts
For those seeking returns similar to the stock market without the associated risk, private mortgages offer a two-in-one solution: Historical NAV stability and returns that can deliver twice that of bank deposits.
“Retail clients can hold their Antrim MIC in a self-directed RRSP, TFSA, or RRIF,” says Granleese. When investing with an RRSP the investor has their trust company or financial institution deposit funds on their behalf into the MIC. For a typical $25,000 investment the investor receives a preferred share certificate in the amount of 25,000 preferred shares with a par value of $25,000.
Antrim’s management team purchases select mortgages with these funds. They also maintain cash within the portfolio so that existing investors can redeem their principle amounts according to a T+2 policy, something other MICs will not offer.
A simple solution
Antrim’s fund offers top shelf liquidity, stable income surety, and two-business day buys and sells. Clients can take dividends in cash, or direct returns toward more shares. Recalling the former $25,000 hypothetical, during a period where the dividend rate is 6 per cent, the fund would yield $1,500.
“We call this the ‘fixed income solution’,” says Granleese. “For the investor who’ve lost their taste for volatility, Antrim is where stability lives.”
Source: Wealth Professional