High Yield Alternative To Mutual Funds



High yield bonds (also known as “junk bonds”) are non-investment grade fixed-income instruments. High yield bonds may be unsecured and/or may be lower in payment priority in the event of default or bankruptcy of the issuing company. Therefore, high yield bonds have a higher risk of default and carry more risk than investment grade bonds and certain other fixed income securities. Because of the higher risk, they also pay a high yield.

Once primarily the domain of institutional investors, high yield bonds gained attention from individual investors over the last several years because of the low interest rate environment. While such investors found the higher yields attractive, the challenge for some was that their portfolios could not tolerate the concentration of risk that may occur as a result of holding individual high yield bonds. This paved the way for High Yield Mutual Funds to allow investors to invest in these types of securities in a manner that was more diversified. The combination of a low interest rate environment and access to mutual funds with high yield caused investors to place money into them at an increasing rate.

Because the portfolios of these high yield mutual funds hold lower quality bonds, there is greater exposure to economic and other changes which may adversely impact the underlying company’s financial performance and ability to pay on the bonds. Specifically, the risk of default is high and there is a higher chance an investor may lose their money as compared to mutual funds containing investment grade bonds or higher quality assets.

As one can imagine, managing a portfolio of high yield bonds requires a higher level of intensity by the mutual fund manager both initially and on an on-going basis. Therefore, the skill and experience of the mutual fund manager may be of critical importance when selecting investments in this asset class.

High Yield Mutual Fund Alternatives

The WFP Income Fund, LLC (the “WFP Income Fund”) and the WFP Opportunity Fund, LLC (the “WFP Opportunity Fund”) are pooled mortgage funds managed by Wilshire Finance Partners (“Wilshire”) that may be lower risk high yield alternatives to mutual funds. Specifically, these funds invest in loans secured by a hard asset – real estate. Further, they are designed to be short-term fixed income alternative investments that are not correlated to the bond markets or other fixed income securities, and to have little to no sensitivity to interest rates.

The WFP Income Fund consists of a diversified pool of first mortgages and deeds of trust with lower loan-to-values secured by real estate. Like a mutual fund, this fund seeks to mitigate risk through diversification across a number of different factors. The WFP Income Fund has a target net annualized return between 7% and 8%, which places it in the high yield fund category.

The WFP Opportunity Fund is designed to deliver high yield to its investors through real estate-based opportunities which have the potential for higher returns. Similar to a high yield mutual fund, this fund also seeks to mitigate risk through diversification and active fund management.

The WFP Income Fund and WFP Opportunity Fund are not mutual funds and are only offered to accredited investors through a private placement. Although they have certain attributes that are similar to a mutual fund, including professional management of diversified pool of investments, they are not exchange traded and do not permit unrestricted redemptions. Specifically, the WFP Income Fund has a 1 year lock-in period and the WFP Opportunity Fund has a 2 year lock-in period, with each fund permitting redemptions thereafter in accordance with their respective operating agreements.

How should the funds offered by Wilshire be positioned in an investor’s portfolio?

Both the WFP Income Fund and WFP Opportunity Fund are short term fixed income investments that generate income.

The WFP Income Fund should be considered a short term fixed income alternative investment that generates monthly income. It is suited for conservative investors who would like to receive higher income with greater consistency as compared to high yield investments, but without commensurately greater risk.

The WFP Opportunity Fund generates quarterly income and should be considered by investors who have a higher risk tolerance and are seeking higher risk adjusted returns. Those investors are willing accept fluctuating returns in each interim period in exchange for potentially greater returns over a longer period.

Learn more about the fixed income investments offered through Wilshire

Please contact us at (866) 575-5070 to obtain further information about high yield investing through Wilshire Finance Partners.


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.

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