There is often a lot of confusion about the difference between what is a MIC and what is a REIT. This article aims to explain some of the differences. However, both are good options for institutional asset management.

Like REITs, MICs or Mortgage Investment Trusts are a type of syndication that allows a group of people to pool resources to reduce risk and maximize income. However, MICs differ from real estate investment trusts, and are a tool that invests in mortgages secured by real property, rather than the real property itself (this is what a REIT does, just like MICs do). RELP).

However, again, like REITs and MICs, mortgage mutual funds are an investment tool with a low barrier to entry, and that also leaves the investors without the responsibility of managing the day-to-day operation. .

A MIC investment also allows for the pooling of investor funds, and this is an important point. By working together, investors are able to pool smaller individual investments and can achieve much more by working together.

Like their complementary investment vehicles, mortgage investment corporations are intended to provide stability for unit holders. In the case of PRMs, this is done by investing in a diversified portfolio of mortgage loans. This means that the pool can absorb the effect of possible defaults. Compare this to this situation of an individual investor investing in an individual mortgage that defaults: there is no protection whatsoever.

Also, with an MIC, loan rates are locked in at the beginning of the contract, so changes in bank rates won’t affect things for investors right away, at least not until renewal dates.

Like the typical Canadian REIT, MIC investors benefit from a strong management team. Managers manage day-to-day operations, establish and execute credit strategy, secure beneficial interest rates, and also manage principal and returns for participants. And, it goes without saying that the management team, rather than the individual investor, assumes all investment risks and responsibilities. It is a win-win situation.

Another benefit of mortgage investment corporations is that they invest in mortgages, rather than real estate. Although real estate is generally insulated from market fluctuations and is a safe and stable bet, mortgages are considered even safer. Regardless of whether or not the mortgage value decreases, the borrower must make predetermined monthly payments, and if there is a default, the MIC can still foreclose on the property.