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Achieving fixed income goals can be hard in an environment filled with volatility, yield challenges, and sticky inflation — and it’s getting tougher. “Trade tensions, tariffs, and shifting monetary policies have only heightened this uncertainty,” says Elizabeth Wood, Chief Administrative Officer and Chief Compliance Officer with CMI Financial Group.
As many financial advisors are looking beyond the long-standing fixed income options, one alternative that’s gaining traction is private mortgage investments. While vehicles like Mortgage Investment Corporations (MICs) and Mutual Fund Trusts (MFTs) aren’t new, their role and benefits have become more prominent.
After 2022, when stocks and bonds declined at the same time, Wood says investors were forced to rethink assumptions about how asset classes behave. That experience challenged the belief that bonds will always offset equity risk and, she says, “exposed the limitations of traditional fixed income.”
“The 60/40 portfolio mix of stocks and bonds — once considered a reliable, balanced strategy — isn’t cutting it anymore. To create all-weather portfolios, investors and advisors must adopt a more creative strategy for fixed income.”
Pooled mortgage investments have emerged as a viable solution. These strategic tools can offer consistent income, compelling risk-adjusted returns, capital preservation, portfolio diversification, and resilience. Understanding how MICs and MFTs work, and the part they can play, can unlock powerful new portfolio possibilities for clients.
The search for genuine diversification
Wood suggests that many investors aren’t satisfied with surface-level diversification.
“They’re looking under the hood and asking how each part of their portfolio is likely to perform when markets get volatile. They want investments that offer genuine diversification — not just the appearance of it.”
Mortgage investments offer a differentiated source of returns, with a low correlation to public markets. They’re structured to generate consistent income through all types of market cycles.
These vehicles invest in diversified pools of short-term residential mortgages. Historically, yields have exceeded those of Guaranteed Investment Certificates (GICs) or Government of Canada bonds. The annual returns have ranged from 6 percent to 11 percent.
As Wood notes, these products are secured by tangible assets – the properties themselves. That adds a level of protection and income predictability.
“Even growth-oriented investors are taking a harder look at downside risk and how their portfolios are positioned to weather a potential downturn. Investors today are focused on generating reliable cash flow that isn’t tied to the daily ups and downs of the market. They want income that’s stable, even when the market isn’t. This is where mortgage investments stand out.”
Easier access for investors
CMI is one of Canada’s largest private lenders by new originations and a leading private residential mortgage investment firm. The company has more than $3 billion in funded mortgages and over $1 billion in assets under management.
While investors can fund individual mortgages directly, this approach requires significantly more capital (e.g., $500,000 to $1 million in liquid assets) and risks (full exposure to the loan’s performance).
With MICs and MFTs, investor capital is pooled and invested across a diversified, professionally managed portfolio of mortgages. A team of experts is responsible for sourcing, underwriting, funding, and monitoring each loan.
The entry point and structures are also appealing. Individuals can often invest with just $5,000, and MICs and MFTs can be held within Registered Retirement Savings Plans (RRSPs) and Tax-Free Savings Accounts (TFSAs). Many also offer automatic Dividend Reinvestment Plans (DRIPs), allowing investors to benefit from compound growth over time.
Private mortgage investments offer several advantages over bonds or GICs. Besides higher yields, they have shorter durations (many mortgages mature or reset annually), which reduces interest rate risk and provides better protection against inflation. They also offer flexible redemption terms (most MICs allow redemptions after 12 months) without price volatility.
These products give advisors a middle ground between fully liquid assets and long lockups found in other private credit vehicles.
Wood adds that MICs and MFTs differ in key ways from Real Estate Investment Trusts (REITs). While all these vehicles are real estate-related investment options, REITs invest directly in income-producing properties (like apartments, commercial spaces, and office buildings) and generate income primarily from rent.
“Because of this, REITs are sensitive to fluctuations in real estate market conditions and interest rates. Mortgage funds, on the other hand, don’t own real estate directly. They invest in mortgages backed by real estate, earning income from interest payments on those loans. Private lenders set their own rates, so they have more control over yield stability.”
Suitable for many client profiles
Two misconceptions about these products are that they can be risky and difficult to evaluate. Yet this segment has seen increased scrutiny and transparency, says Wood.
“When managed professionally and backed by strong underwriting, they can offer a compelling risk-reward profile, especially compared to other fixed income options.”
MICs and MFTs offer greater access than other private credit alternatives and serve the portfolio needs of multiple types of clients. That includes income-seeking retirees, investors with moderate risk tolerance (who want higher yields without excessive volatility), those who want enhanced diversification, and those concerned about interest rate fluctuations and inflation.
It’s not about replacing bonds but augmenting a fixed income sleeve. To enhance cash flow while mitigating rate and market risks, these mortgage investments are “a great turnkey solution,” says Wood.
“Private mortgage investments aren’t just a niche income solution. They’re a versatile, strategic asset class that can strengthen portfolio construction across income, balanced, and growth mandates.”
To learn more about opportunities for your clients with mortgage investments, click here.
