does anyone do the motorgage fund investment

[jdgay22]

they say that the lowest minimum on some are 5k but the returns are usually 10% plus

[msnln]

Re: does anyone do the motorgage fund investment

When you say Mortgage Fund Investment, do you mean CMOs, Collateralized Mortgage Obligations? Up until two years ago, I was a fixed income portfolio manager for a bank and I am familiar with these products. Although principals on these products are guaranteed in many cases (especially if they are Fannie Mae or other government agency backed), they are poor investments as the cash flow has inverse convexity.
Basically with mortgages, when the rates go down, people refinance high rate mortgages so if you have mortgage pool that is comprised of high interest, they will be paid down quickly. The repayment will come back to you in form of redemption and you will have to find place to invest the funds in low interest environment.
During rate increasing environment, you will find opposite happening. People who have mortgaged at low rates will not be repaying their mortgages any time soon, other than what is required by amortization schedule. So, you are stuck with a mortgage pool that has low return and redemptions speed will slow down. All mortgage products have prepayment speed estimate and I would think most are paying slower than schedule at this time.
One more risk is that these are 15 or 30 year investments at their inception, so you would have to weigh that in your decision making process. Secondary market exists but not as liquid as stock or even corporate bonds, thus wide bid-offer spreads. I would also consider discounted SBA loan passthroughs but that is another subject matter.