Which Fund Structure Is right For You?
The single biggest difference between a pooled mortgage fund and a contributory mortgage fund is that in a pooled mortgage fund an investor’s capital and income return is tied collectively to the performance of a diversfied pool of mortgages whereas in a contributory mortgage fund an investor’s capital and income return is tied exclusively to the performance of the specific loan (or loans) in which they select to invest.
The table below contrasts the key structural elements of the KC Diversified Income Fund and the
KC Select Income Fund.
| KC Diversified Income Fund | KC Select Income Fund | |
|---|---|---|
| Investment Type | Pooled mortgage fund. | Contributory mortgage fund. |
| Mortgage Types | First mortgages loans only. | First or second mortgages loans. |
| Investor Suitablity | This Fund is designed for investors who want a passive investment experience with their funds invested in a diversified pool of first mortage loans. | This Fund is designed for investors who want to take an active and self-directed interest in which underlying first or second mortgage loan(s) their funds are invested. |
| Risk / Return | All investor share equally, according to their relative proportional interest in the Fund, to all of the mortgages within the pool. | As an investor in the fund your income return as well as return of capital are directly linked to the specific loan(s) that you select. |
| Minimum Investment | $25,000 in the fund. | $25,000 in the fund, $25,000 per loan. |
| Income Distributions | Income distributions are generally paid monthly in arrears to either a nominated bank account or reinvested as additional units in the fund. | Income distributions are paid in accordance with the terms of the underlying loan as outlined in the Supplementary Product Disclosure Statement related to the specific mortgage investment. |
| Expected Income Distribution Return | The expected income distribution return of the Fund is between 7.50% and 8.50% p.a. The income distributions from the Fund are variable and subject to changes in the Funds underlying asset base and the income received by the Fund each month. | The expected income distribution return of the Fund depends on the loan(s) selected by an individual investor and the relevant borrowers meeting their repayment obligations. Typically this will be between 7.50% and 8.50% p.a. on first mortgage investments and 13.00% and 15.00% p.a. on second mortgage investments. |
| Investment Term | There is no minimum term, however the investment term is subject to Keystone making a withdrawal offer as outlined in the Product Disclosure Statement. | Generally 6 months to 2 years. The investment term is directly linked to the underlying loan term of the particular mortgage investment. The term is outlied in the Supplementary Product Disclosure Statement related to the mortgage investment. |
| Withdrawal of Capital | Subject to liquidity, Keystone intends to make quarterly withdrawal offers to eligible investors. When a withdrawal offer is made, eligible investors in the Fund are entitled to apply for withdrawal of all or some of their funds. Further details of the withdrawal arrangements are contained within the Product Disclosure Statement. | When invested in the Transitional Cash Account, investors can withdraw their funds with 5 working days’ notice. When invested in a specific mortgage investment, investors cannot withdraw their funds until the loan is repaid. |
