How Magenta produces consistent high returns

Over the past two decades, investment returns generated by the three Magenta Mortgage Group MIC’s have substantially exceeded those produced by alternative fixed income investments such as stocks, bonds and GICs.  In addition, these wealth-building returns have been achieved without the levels of volatility associated with other investments.

Several factors make these results possible:

1. Attractive interest rate spreads and fee income
Magenta MICs employ a bank credit facility. The substantial positive spread between the bank loan rate, and the interest rates applicable to the mortgages issued, substantially increases the investment returns achieved. Fee income is another contributor to returns, as investors benefit from application, set-up, administrative and penalty fees charged to our borrowers.

2. High-quality mortgages and real estate
We have an extremely low default history, and the investment returns you see are reported net of all expenses, including loan loss. We invest primarily in first mortgages secured by owner-occupied homes, seasonal cottages, residential building lots and land, and secondarily in carefully-chosen residential 2nd mortgages. Most mortgages are secured by real estate in Metropolitan Ottawa and Kingston, Ontario. These are stable, buoyant real estate markets where a significant public sector component renders the regional economies largely recession-proof.

3. Broad portfolio diversification
Magenta shareholders own an interest in a large, diversified, professionally managed, growing pool of quality mortgages. The portfolio is monitored daily to ensure an optimal mix of different mortgage types, and that the portfolio is always as fully invested as possible. Could you invest directly in a mortgage by yourself? Yes, you could, but you would need a substantially greater investment, and you would face far greater potential for capital loss due to a lack of diversification.

4. Professional management
Magenta MICs are managed by very capable professionals, with substantial career experience in all facets of mortgage lending, real estate appraisal, banking and mortgage law. Because we are active in the mortgage market on a daily basis, we have the expertise and knowledge to ensure that we negotiate the most favourable interest rates, fees, and other terms and conditions possible. Once a mortgage is advanced, we handle all facets of portfolio administration. This includes the collection of mortgage payments, payment of realty taxes, maintenance of insurance coverage, mortgage renewals and ultimately discharge of the mortgage.

5. Employee ownership
Magenta employees have invested nearly $6 million of their own money with Magenta. The CEO has also personally guaranteed the companies’ bank debt. In short, Management and staff are highly motivated to achieve the highest investment returns possible, while at the same time mitigating risk as much as possible, consistent with the imperative of ensuring and protecting the long term viability of the Companies.

6. Transparency and oversight
The type and quality of the mortgages in our portfolios are governed by strict requirements encoded in our bank credit agreements.  The banks also provide ongoing oversight by reviewing individual mortgages, appraisal reports and agreements of purchase and sale and by requiring detailed monthly, quarterly and annual reporting.  This level of due diligence is commensurate with the size of the credits afforded to our companies.

Please contact us if you would like to review our most recent audited financial statements or receive a comprehensive investor information package.

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