ABOUT | TRUSTS AND FUNDS
Debentures (now called general or specific security agreements) are a
type of security issued by companies (mainly finance companies and large
industrial firms) in return for investment of funds. The security for the
debenture-holder is usually in the form of a fixed and floating charge
over the assets of the company issuing the debenture. With debenture stock
you are virtually lending the company money on security over its assets.
Mortgage trusts have, as the underlying security for their investment, registered first mortgages over land and buildings.
A mortgage is charge over real (i.e. land) property securing the payment of the loan. A registered first mortgage is the first charge over the property and must be repaid before any subsequent charge (e.g. a second ranking registered mortgage).
One of the factors lenders consider before they approve a mortgage is the ‘loan to valuation ratio'. This is the loan amount expressed as a percentage of either the purchase price or the appraised value of the property.
Mortgage trusts are one of the oldest examples of a collective investment vehicle. A mortgage trust ‘pools' the money of investors then selects investments (which are funded out of the pool) in accordance with a Trust Deed. The attraction of a mortgage trust is that it allows investors to do collectively what they otherwise generally cannot do individually, either because of lack of time, expertise, sufficient capital, or any combination of these factors.
A liquidity strategy is the method by which the fund is able to meet the day to day withdrawal requirements. First Mortgage Trust has held an increased level of cash since October 2007 in response to changes in world financial markets.
No. But the manager may do so from its own funds.