High Yield Investment Funds & Trust Deeds
High Yield Investing at Wilshire Finance Partners
The nirvana of investing would be finding an investment that provides high current returns, high capital appreciation, and zero principal risk. The reality is that all investing involves some degree of risk.
However, many savvy investors have learned that the secret to lower risk, higher yield investing involves locating investments that share the following attributes:
- Simplicity: Often investments that are very complex or unique result from a tremendous amount of financial engineering or structuring in an attempt to mitigate risk.
- Consistency: From consistency flow the concepts of “repeatability” and “sustainability.” Specifically, if the results of the underlying investment can be repeated over a prolonged period of time, it will result in consistency.
- Stability: Certain investments are subject to a number of external factors that need to be actively monitored, managed and potentially hedged (either by the investor or others) because of the sensitivity of the investment to changes in those factors. Such factors may include stock or bond market fluctuations, changing interest rates, changes in the national or global economy, geopolitical conditions and other factors. Conversely, investments with little to no correlation, less sensitivity or lagging impact to such factors may provide greater stability for the investor’s principal investment.
Many investors and their advisors have used real estate as means to diversify a portfolio or eliminate correlation among investments in an investment portfolio. Albeit recent years have tested many real estate models, over longer periods real estate investments have provided many of those anticipated benefits to investors. However, as most real estate investors know, real estate is cyclical and each type of real property is sensitive on various degrees to different factors. Therefore, for the direct real estate investor who cannot wait years or even decades for the benefits of a real estate investment to be realized, even a slight change in value may result in a loss.
High Yield Investment Funds versus Trust Deed Investments
A little known, but nevertheless proven, investment strategy are investments in funds backed by real estate loans versus direct real estate investment. An investment in a fund holding real estate loans differs from an investment in mortgage-backed securities which lose the simplicity of the investment and carry similar market risks of other exchange-traded securities. Further, investments in real estate loan funds differ from a direct real estate investment because they do not carry the inherent risks and hassles of ownership, including, being at risk for the first loss in a declining real estate environment and getting calls at midnight to address tenant issues.
Since 2008, Wilshire Finance Partners has arranged and invested in high yield, short-term, lower loan-to-value, bridge loans secured by real estate in first lien position. A short term bridge loan covers the financial or timing gap borrowers often experience when making real estate investments. As a result, those loans typically command a much higher rate of interest as compared to institutional loans, which in turn translates into a high yield for the investors in those loans.
From its inception, Wilshire has focused on providing investors with a simple, straight-forward investment approach that strives to provide Stable Income and Principal ProtectionTM through investments in higher yielding, shorter term loans secured by real estate. As a foundational matter, Wilshire’s philosophy is that while diversification will help to mitigate overall portfolio risk, each loan is a building block and the strength and consistency of an investment portfolio derives from making higher quality loans. By ensuring that the underlying loan adheres to a set of conservative underwriting principles, the quality of each loan adds to the Wilshire portfolio structure versus the MBS and CMBS model of potentially using structure to compensate for more aggressive loans.
Employing many of the principles used by Wilshire when making individual trust deed investments, in 2013 Wilshire launched the WFP Income Fund and the WFP Opportunity Fund.
The WFP Income Fund is one of the high yield funds professionally managed by Wilshire. It is designed as a fixed income investment alternative which invests in short term bridge loans secured by first deeds of trust and mortgages against real estate. However, among the fundamental differences between individual trust deed investments and investing in a fund like the WFP Income Fund are the added benefits the fund provides; including, further risk mitigation through diversification, compound interest through dividend reinvestment, more efficient deployment and management of the invested capital, and the consistency that is afforded under pooled mortgage funds.
The WFP Income Fund is designed as an evergreen fund where an investor in the fund has the option to redeem in accordance with the fund’s operating documents after a one (1) year lock-in period. The result is the potential for a shorter investment horizon as compared to many REITs. Like other mortgage funds, the WFP Income Fund generates income to its investors primarily through the interest paid on the mortgages and deeds of trust in its portfolio. The target net annualized return for the WFP Income Fund is 7.5% to 8%, paid monthly.
The WFP Opportunity Fund is another of the high yield funds managed by Wilshire. As implied in the name, this fund is designed to seek opportunities for higher risk-adjusted returns through institutional quality execution in real estate-based debt and equity investments. Specifically, as a hybrid fund the portfolio of the WFP Opportunity Fund may include short term mortgages and deeds of trust, joint ventures and participating loans, and direct ownership of residential and commercial real estate. Like the WFP Income Fund, the WFP Opportunity Fund is also designed as an evergreen fund but has a two (2) year lock-in period with the ability to redeem thereafter in accordance with the fund’s operating documents. Therefore, the WFP Opportunity Fund also provides investors with the potential for a shorter investment horizon. The target net annualized return for the WFP Opportunity Fund is 12%, paid quarterly.
The result is an investment platform that gives Wilshire investors the option to invest in individual trust deeds or a high yield fund backed by real estate loans to help provide:
Simplicity | Consistency | Stability
How to Invest in Real Estate Loans & Trust Deed Investments
While investing in real estate loans is a lot easier to understand than more complicated investments, like other investments prior to investing in real estate loans an investor should have an understanding of the nature of the investment and its risks and rewards.
To assist both the seasoned and novice investor about the ins and outs of trust deed investing, Wilshire has also prepared a white paper that is a compilation of the most frequently asked questions Wilshire has received from potential investors regarding investments in individual trust deeds. Our white paper covers basic topics like “What is a Trust Deed” and “How Liquid is My Trust Deed Investment,” as well as fundamental topics such as the risks and rewards inherent in trust deed investments. Our goal in discussing the topics in the white paper is to help educate the new investor and serve as a reminder for the experienced investor.
Because investments in Trust Deeds, the WFP Income Fund and WFP Opportunity Fund are offered by Wilshire through a Private Placement in accordance with Rule 506(c) of Regulation D under the Securities Act of 1933, as amended (the “Act”), all investors must be Accredited Investors who receive the respective Private Placement Memorandum, Subscription Agreement and related documents, and who otherwise meet the general suitability standards contained in those documents.
Please contact us at (866) 575-5070 to receive more information about the investments offered through Wilshire Finance Partners.
* ADDITIONAL DISCLOSURES:
ADDITIONAL DISCLOSURES FOR TRUST DEED AND MORTGAGE INVESTMENTS:
The information contained on this Website (the “Overview”) is not an offer to sell or the solicitation of an offer to purchase trust deed or mortgage investments, or the securities of the WFP Income Fund, the WFP Opportunity Fund or other securities or investments (individually and collectively, the “Investments”) offered through Wilshire Finance Partners, Inc. (“Wilshire”). The purpose of this Overview is to provide an overview of one or more Investments and its private placement. Persons interested in learning about one or more Investments and their private placement will be provided with the Private Placement Memorandum, Operating Agreement (as applicable), Subscription Agreement and other related documents (collectively and inclusive of exhibits and any supplements thereto, the “Memorandum”) prepared by Wilshire, which provides a description of the particular Investments, the terms of the private placement, a discussion of risk factors, and other information related to such Investments. To the extent that there is any inconsistency between the information provided in this Overview and the Memorandum, the Memorandum shall control. This Overview and the Memorandum contain certain forward-looking statements regarding the Investments. The forward-looking statements are based on current expectations that involve numerous risks and uncertainties which are difficult or impossible to predict accurately and many of which are beyond the control of Wilshire’s management, including, but not limited to, national and international economic conditions, changes in legislation, and other factors that can disrupt economic stability. Although Wilshire believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements, the inclusion of such information should not be regarded as a representation by Wilshire, any placement agent, or any other person, that the respective objectives and strategies of investing in one or more Investments will be achieved. Investments be made solely by accredited investors (which for natural persons, are investors who meet certain minimum annual income or net worth threshold), who are provided with the Memorandum and who complete, execute and deliver the subscription documents included therein. The Investments are securities and each of the Investments are being offered in reliance on an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), provided by Regulation D, Rule 506(c), and are not required to comply with specific disclosure requirements that apply to securities registered under the Securities Act. Neither the Securities Exchange Commission nor any state securities regulator or agency has passed upon the merits of or given its approval to the securities, the terms of either offering, or the accuracy or completeness of any offering materials. As securities offered in an exempt transaction, each of the Investments are subject to legal restrictions on transfer and resale and investors should not assume they will be able to resell the Investments. Past performance is not indicative of future results. The Investments involve substantial risk, including loss of investment, and is not suitable for all investors. Loans are made by Wilshire Finance Partners, Inc., Bureau of Real Estate Broker’s License number 01523207. Loans made by Wilshire Finance Partners, Inc. outside California will be made pursuant to licenses, authorizations or exemptions in each other state.