Canadian Conventional Long Mortgages



The Canadian Conventional Long Mortgage strategy seeks to provide relatively high yields by investing primarily in a portfolio of longer term first mortgages on income producing properties located in Canada. The strategy’s objective is to capitalize on the liquidity premium associated with investing in mortgages while limiting mortgage credit risk. Diversification is a key part of the investment strategy.

Strategy overview

  • Invests primarily in longer term individual first mortgages on commercial (industrial/office/retail) and multi-residential properties
  • Diversified by property types, tenants, borrowers, and geographies, with an emphasis on major population centers
  • Liquidity premium main driver of returns
  • Duration is extended via use of derivatives
  • Redemptions available daily with no notice, subject to available liquidity

Our approach

Investment philosophy and style

  • Focus on capital preservation and consistent added value through market cycles
  • Significant breadth and diversification help mitigate mortgage-specific risk
  • Quality-biased, long-term portfolio with mortgages held to maturity

Investment process

  • Top-down origination strategy focused on portfolio construction and setting origination guidance
  • In-depth credit analysis drives individual investment decisions
  • Risk mitigation through negotiation of individual mortgage terms and structure, unique to each investment decision
  • Proactive approach to risk management throughout the life of each mortgage which informs the team's origination strategy moving forward

Portfolio construction

  • Mortgages with a maximum loan-to-value ratio of 75% and a minimum cash flow coverage ratio of 1.25x
  • No maximum term to maturity
  • Maximum 5% invested in a single mortgage
  • Duration extended via use of derivatives
  • Liquidity premium is main driver of returns
  • Targets a 10% allocation to cash and short-term investments to allow for daily redemptions

Additional information

Inception
August 2005
Primary benchmark
No benchmark
Vehicle
Canadian Investment Fund

Investment team

RBC GAM Private Markets Mortgage Investment team

Group of specialists dedicated to designing and implementing mortgage solutions

Connect with our team to learn more