Maximizing ROI Through Passive Investments: A Case for Debt Funds

In investment, most accredited investors chase the same bottom line: highest ROI with the least possible risk. Passive investments have, over time, grown to be one of the most common means whereby an investor can possibly get steady returns without much hands-on involvement from an investor, as compared to an active investment. A class of investment vehicle that has grown in popularity with passive investors involves those dealing in paper debt, more specifically debt funds operating within the trust deeds. In this way, debt funds can be an effective solution for investors in search of regular cash flow and protection against volatility.

What are Debt Funds?

Put simply, a debt fund pools the capital of investors together and lends it out to borrowers, often against the collateral of real estate. Debt funds, especially those invested in trust deeds, are structured so that their focus is on income-generating loans, while returns show less volatility compared with other equity-based investments, such as common stocks. The returns from these funds are generally fairly predictable in nature, since most of the income usually comes from the form of steady interest paid against loans, making it a suitable alternative for investors who aim to get a stream of passive income with relatively lower risk.

Trust Deeds: A Secured Investment Option

There are certain advantages to debt funds invested in trust deeds. When you invest in a trust deed, your investment is secured by real estate. To explain this in simpler terms, in the event of default on the part of the borrower, as an investor you have a legal claim on the property and can sell it to recover the loan. Such security makes trust deeds more alluring when compared with unsecured loans or bonds.

But what sets them apart in the existing market scenario?

Why Passive Investments Like Debt Funds Are Gaining Popularity

• Predictable and Consistent Returns

Passive investment through debt funds offers very predictable returns, typically predetermined from the interest rates levied on a loan. While other assets, such as stocks, may fluctuate wildly, a trust deed offers stability to the investor. You can anticipate a very stable return on investment, typically within a narrow bandwidth of around 8-10%, based on terms found in the debt fund.

• Lower Volatility Compared to Equities

One of the biggest fears for many accredited investors is market volatility. Stocks can fluctuate wildly in price, and often, their peaks and valleys are based on the sentiment of the market, current economic events, or even political changes. On the other hand, trust deed investments are less prone to this kind of volatility. They invest in real estate, which is physical in nature and has conventionally appreciated in value over time.

• Diversification

A general rule of thumb for all investors is to never place all your eggs in a single basket. Debt funds enable you to diversify your portfolio by adding real estate-backed loans. In doing so, you accomplish two things at once: you spread your risk and reduce the overall volatility that comes with more volatile assets, such as equities. In addition, many debt funds-including that provided by LBC Capital Income Fund, LLC Income Fund-diversify their assets across property types and geographic locations, hence further reducing risks.

• Hedge Against Inflation

Perhaps one of the biggest concerns for investors in today’s world is the rise in the rate of inflation. Inflation can quickly drain the real purchasing power of your returns, especially from fixed-income investments like bonds. However, trust deeds are usually secured by real estate-a hedge against inflation. Over time, property values appreciate; therefore, the security underneath the loan also appreciates, providing greater protection for the investor.

• Completely Passive Income

Unlike direct investment in real estate, where one is supposed to manage properties, deal with tenants, and handle maintenance, investment in a debt fund requires little to no involvement on the part of an investor. All issues-from sourcing the loans and assessing borrower risks to managing defaults, should that happen-are handled by the team of the fund management company. In return, the investor gets regular interest payments, and this is truly a passive income stream.

Case Study: How Debt Funds Outperform Bonds
Let us give you an example: Suppose the accredited investor has US$250,000 to invest and is considering bonds or a debt fund, such as the one being offered by the LBC Capital Income Fund, LLC Income Fund.

Bonds: When it comes to investing in bonds, or more so corporate bonds, you can expect to yield a return of about 4-5% annually. While such a return is good, it may not keep pace with the rate of inflation, let alone yield an amount adequate to meet long-term financial goals. Moreover, bonds tend to be very sensitive to increases in interest rates; hence, their market value may decline in such a situation.

Trust Deed Debt Fund: A similar investor, if invested in a debt fund with trust deeds as collaterals, can reap returns of 8-10% annually. Moreover, since the loans are collateralized by real estate, it adds an extra layer of security where even the risk of capital loss is somewhat minimal. The shorter-term nature of trust deed investments also means the investor is less exposed to interest rate fluctuation, as loans are usually repaid within 1-3 years.

Over time, this higher return on the debt fund can substantially enhance the overall wealth of an investor compared with bonds.

Why LBC Capital Income Fund, LLC Income Fund?

LBC Capital Income Fund, LLC Income Fund has the experience in yielding attractive and stable returns for investors who look for passive income streams through trust deeds. Consequently, our investment professionals have been in the real estate and lending industries for 13 uninterrupted years now, prudently managing those risks while offering predictable returns to our investors. Some of the major distinguishing attributes of LBC Capital Income Fund, LLC are as follows:

• Minimum investment requirement of $150,000: This is solely for accredited investors to ensure a sophisticated financial understanding from our clients.
• Between 8-10% Return: Our fund provides very attractive returns that outperform most traditional investments with an income focus, such as bonds and savings accounts.
• Fully Secured by Real Estate: Every loan in our portfolio is secured by tangible real estate; thus, providing comfort for investors.
• Transparency and Communication: The investors are regularly informed about the performance of the funds through a view of detailed financial reports of the overall activities of the fund.
  
  Trust Deeds as a Path to Maximizing ROI
  In this dynamic financial environment, a large number of accredited investors are reevaluating their dependence on bond investments. In the face of rising inflation and fluctuating interest rates together with economic uncertainty, trust deed investment provides an attractive alternative. Debt funds, especially those that invest in loans collateralized by real estate, provide regular income with much lower volatility and as an inflation hedge while offering a thoroughly passive income experience.

Trust deed investments through debt funds could be a very informed choice for those who want to grow their wealth with controlled risks. With a high-past-performance record and a crystal-clear, well-managed investment strategy, we at the LBC Capital Income Fund, LLC Income Fund enable our investors to maximize returns and realize financial stability.