Trust Deeds as an Alternative to Bonds in a Rising Interest Rate Environment

When investors seek reliable returns without risking too much of their capital, bonds have traditionally been a go-to option. But with interest rates on the rise, the dynamics of the bond market are shifting rapidly, leaving many to wonder whether bonds still provide the same level of security and returns they once did.

Enter trust deeds—an often-overlooked yet powerful investment strategy that offers a viable alternative to bonds, especially in fluctuating interest rate environments. In this article, we’ll explore how trust deeds work, why they are particularly appealing when interest rates are high, and why LBC Capital Income Fund, LLC Income Fund is uniquely positioned to help investors leverage this strategy.

What Are Trust Deeds?

Before diving into why trust deeds can be a great bond alternative, it’s essential to understand what trust deeds are. A trust deed is a type of investment secured by real estate. In essence, when you invest in a trust deed, you’re investing in a loan that’s backed by a property. If the borrower defaults, the property serves as collateral, which can be sold to recover the investment.

Trust deeds typically provide higher yields than traditional fixed-income securities like bonds. Since the investments are backed by real estate, they offer a level of security that can mitigate risk—making them a worthwhile consideration for accredited investors looking for an alternative to bonds.

Why Are Bonds Less Appealing in a Rising Interest Rate Environment?

Interest rates and bond prices have an inverse relationship. As interest rates increase, the value of existing bonds tends to drop because newer bonds offer higher yields. Investors holding onto bonds they purchased at lower rates are often left with decreased asset values, which can erode overall returns.

In an environment where rates are expected to rise, bonds become less appealing due to:

1. Decreased Market Value: Bonds issued at lower interest rates lose market value.
2. Lower Real Returns: Inflation and rising rates can diminish the real purchasing power of fixed coupon payments.
3. Potential Liquidity Concerns: With fluctuating bond prices, selling bonds before maturity might lead to significant losses.

The Unique Advantage of Trust Deeds in High-Interest Rate Markets

In contrast, trust deeds offer a way to maintain stability and yield in a rising interest rate environment. Here’s how:

1. Shorter Duration: Trust deeds often have shorter durations (1-3 years), making them less susceptible to interest rate risk compared to long-term bonds.
2. Real Estate Collateral: Investments are backed by tangible real estate assets, providing a layer of security and stability.
3. Attractive Yield: Even as interest rates rise, trust deeds can continue to offer attractive yields that are competitive with, or exceed, new bond offerings.
4. Predictable Cash Flow: Trust deeds typically offer monthly or quarterly income distributions, making them a consistent and predictable source of cash flow for investors.

Trust Deeds vs. Bonds: A Comparative Analysis

Let’s look at how trust deeds stack up against bonds, especially in a rising interest rate market:

Why Choose LBC Capital Income Fund, LLC Income Fund for Trust Deed Investments?

At LBC Capital Income Fund, LLC, we specialize in trust deed investments, providing our investors with a strategic way to diversify their portfolios. Here’s why our approach stands out:

1. Extensive Experience: With over 13 years in the industry, we have the experience and expertise to navigate fluctuating markets and identify prime opportunities.
2. Proven Track Record: LBC Capital Income Fund, LLC has delivered consistent returns of 8-10% annually, backed by diligent due diligence and risk assessment.
3. Diversification Across Geographies and Property Types: We focus on short-term loans in California and other high-demand metropolitan areas, ensuring our portfolio is well-diversified.
4. Transparency and Access: Our accredited investors have access to detailed reports and updates, allowing for transparency and informed decision-making.
5. Security and Stability: Every loan is secured by real estate collateral, which adds a layer of protection for investors, even in turbulent times.

Addressing Investor Pain Points

As an investor, you might be wondering, “Isn’t real estate just as risky as other investments?” The key difference with trust deeds is how they handle market fluctuations:

• Capital Preservation: Unlike bonds, where the value can diminish significantly as rates rise, trust deeds are backed by real assets. Even if there’s a downturn, the underlying property retains intrinsic value.
• Reduced Exposure to Market Volatility: Trust deed investments are generally not as tied to the ups and downs of the stock or bond markets, providing an added layer of protection.
• Steady Cash Flow: Investors receive regular monthly or quarterly payments, making it easier to forecast cash flow and manage liquidity needs.

We are here to help and provide alternatives. If you are an accredited investor, reach out, and we will answer all your questions, provide financial statements and information about our fund.