How trust deeds can outperform bonds during periods of rising interest rates.

When interest rates begin to rise, many investors head for cover to begin seeking downside protection for their portfolio. Bonds are typically a safe haven, but in these environments, they start to lose some of their glaze, while alternatives like trust deeds pick up the pace.

Today, let’s discuss why trust deeds could be smarter than bonds during periods of rising interest rates and how you can use that knowledge to enhance your investment strategy. We will explore how LBC Capital Income Fund, LLC Income Fund is a highly specialized debt fund that focuses on trust deeds and offers an extremely predictable and stable manner of generating attractive returns while protecting your capital from the volatility of interest rates.

Why Bonds Suffer in a Rising Interest Rate Environment

To understand why trust deeds outperform bonds in a high-interest-rate environment, it is important to understand how the bond market works.

Whenever the interest rates are raised, the prices of existing bonds fall. Why? Because new bonds are issued at higher rates; thus, older bonds with their lower yields become less desirable for investors. This forces the values of the older bonds to fall if those bonds are sold before maturity, which may result in capital losses on the part of the bondholders.

Also, because the bond interest payments are fixed, even as the inflation might be accelerating due to upward-rising rates, thereby not changing the return that the bond earns. That depletes the real value of your returns, which in turn, lowers bonds’ attractiveness when there is an expectation of inflation.

Trust Deed Attractiveness in Rising Rate Scenarios

Now, let’s turn to trust deeds and why they become so attractive in these kinds of environments.

In a trust deed investment, an investor lends money to a borrower against some property. The loan is always security from the collateral of the property itself. In case of default, an investor has a legal claim to the property and is allowed to sell the same to recover the invested money. This form of structure essentially makes trust deeds less vulnerable to rate increases naturally.

Key Benefits of Trust Deeds in a High-Rate Environment:

Advantages of LBC Capital Income Fund, LLC Income Fund:

• Seasoned Team: With our team having more than 13 years of rich experience in real estate and debt fund management, it hand-picks the loans that best fit our strict risk-reward parameters. We focus on hard money loans in prime markets, such as California, where the value of real estate is very stable and thus offers extra security for your investment.

• Returns for Attractive Investment: We seek to deliver consistent, competitive returns in the range of 8-10% annually to our investors. This is well above the yields one would find from most traditional bond investments, especially in today’s rising rate environment.

• Accountability and Transparency: We maintain audited financials and keep our investors updated regularly through our online portal. You will always know how your investment is performing, having full access to the financial statements with detailed reports.

• Diversification: Our investors will benefit from a diversified portfolio of trust deeds where loans are spread across property types and geographic locations. This reduces concentration risk and further protects their capital.

• Liquidity: Although most real estate investments are illiquid, the trust deed investment through LBC Capital Income Fund, LLC is usually shorter in term; many are 1-3 years, thereby providing a level of liquidity most real estate investors don’t normally enjoy.

Pain Points for Investors & How Trust Deeds Address Them

The tension between the need for superior returns versus the need for security tugs at investors. A rising interest rate environment further complicates this delicate dilemma by making bonds less attractive and leaving fewer “safe” options. Trust deeds offer an elegant solution to this.

Pain Point: Lack of Income-the investors dependent on bonds or savings accounts have their income eaten away either by inflation or by more yield-lagging types. Trust deeds represent predictable, regular income that does not change with the market.

Pain Point: Too Much Volatility – The stock market is pretty volatile, especially in a rising interest rate environment. Trust deeds offer a more stable alternative in which the returns are backed by real estate, which generally is less volatile.

Pain Point: Real estate is complicated to manage, and most direct investments in real estate are too ‘hands-on’ for the busy professional. LBC Capital Income Fund, LLC Income Fund manages every aspect of the trust deed investment themselves, hence taking care of passive income with little or no effort from the investor.

when interest rates rise, trust deeds can be an appealing alternative to bonds, offering higher yields, better inflation protection, and a more secure investment vehicle backed by real estate. LBC Capital Income Fund, LLC Income Fund, with its proven track record, experienced team, and diversified portfolio, is perfectly positioned to help investors navigate these changing market conditions. Ready to explore trust deeds as part of your investment strategy? Reach out to us today!