Demystifying Private Mortgage Funds: What Every Investor Should Know About Fees and Liquidity

Private mortgage funds can be an excellent way to generate income, but understanding the impact of fees and liquidity is crucial. Having worked in this space for nearly two decades, I’ve seen firsthand how these factors influence returns. At Steepe & Co., we aim to offer clarity and transparency, ensuring our investors make informed decisions.

One of the biggest issues with private mortgage funds is the conflict of interest between managers and investors pertaining to the borrower fees collected. While many funds disclose management and performance fees, —indirect fees like borrower fees, renewal fees, and commitment fees—often aren’t fully disclosed and understood by investors. The borrower fees collected when kept by the manager, reduce investor returns, and creating a major conflict of interest. At Steepe & Co., we choose to work with managers who avoid these conflicts by not keeping such fees.

Liquidity risk is another key consideration. Private mortgage funds aren’t as liquid as publicly traded securities, meaning you might not have access to your money when you need it. At Steepe & Co., we focus on working with managers who maintain consistency in their investment mandates, providing more stability and reducing liquidity risk.

In summary, fees and liquidity should always be central considerations when evaluating private mortgage funds. At Steepe & Co., we prioritize transparency and partner with managers who align their interests with those of our investors. When investing, it’s essential to ask the right questions—your financial security depends on it. Feel free to ask us the questions by booking a meeting with MIchael Steepe.