has anyone ond done mortage fund investments

[jdgay22]

i really intrested because returns are suposse to be around 8-12%

[CRFSaver]

Define what you mean by fund? As in a mortgage mutual fund? Or a mortgage Reit? It all depends on the strategy that they use. There are lots of Mortgage Reits out there that get nice big yields such as New Century, Novastar, etc. There are also Reits that do more Mortgage securities such as Annaly, Redwood Trust and others.

The mortgage market is agoofy market on the securities side. Companies like Annaly are spread plays that borrow money and invest in mortgage securities, either simple pass through and CMO's to the more complicated structures including down in credit. The difficulty comes in a liquidty crisis where funding dries up (1998 for example).

They can be a good investment but just make sure they have been in the market a long time and can handle choppy markets. Criimi Mae went bankrupt for that very reason. They were holding long sequentials and support pieces and got squeezed when credit dried up.

Some of the best Mortage Managers out there is a company called Smith Breeden Associates. Half the books on MBS investing have been written by the principals. They are a "sub-manager" on a couple of the "Managers Funds". The Fremont Bond fund is another one to look at as it is "sub-managed" by Bill Gross of PIMCO fame.

Look for the dedicated Bond Managers out there. It is a very specialty product.