Real Estate Investments Trusts & Mortgage Backed Securities

Question: Describe about the Real Estate Investments Trusts Mortgage Backed Securities. Answer: Executive summary The analyzed REIT status is quite impressive mainly because the company has managed to pay out 89% of it taxable profit in dividend form. This is a hybrid REIT because it transacts mortgage loans and conducts real estate operations. Due to the fact that the company has REIT status, it has also managed to avoid corporate income tax thus enabling it to maintain impressive results over the past years. Introduction Being an investor working various finance companies, it is important for me to understand which hedging instruments I am going to employ in order to effectively manage the potential interest rate exposure of Genuine Investment Bank. This will enable me to be able to focus on designing the best CMO offering thereby getting more insight on the market and understanding how I will manage to increase profits. It is important to realize that CMO offerings are the new niche; there are also many people who desire to invest in pension funds, hedge funds, and Banks and corporations. This makes the Real Estate Investments Trusts Mortgage Backed Securities more attractive to young individuals who are prepared and willing to take more risk because are a long term investment which entails uncertain risks (Martin Hanbury 14). I am therefore targeting the young people. Analysis of the tranches i. Assumptions Tranches refer to pieces, slices, or portions of structured financing or debt (Pearce, Stevens Barr 55). Tranches usually assume that an MBO ought to coincide with the maturity dates of the primary mortgages. Another assumption of tranches is that a given security may be split up into smaller pieces and subsequently sold. They also assume that a single is supposed to be made up of a pool of mortgage with same or similar dates of maturity (Hudson 84). Time tranching structure There are three types of tranching structures. One of the structures which Genuine Investment Bank is considering is the sequential payout tranch as it encapsulates all the potential CMO investors; however, we are going to focus on the Time tranching. this is because it is not wise to invest in all the three CMOs. With this type of structure, the repayment risk is usually to be paid disproportionately to the different tranches (Haley 40). This structure will ensure that both my target clients and I are protected from various repayment risks thus guaranteeing that we make sound profits from our venture. iii. Summary of the results with respect to the clients targets It is imperative to note that my clients would expect to make an interest of about $413, 375 in the first month when they invest at least $400,000,000; they will be charged an initial principle of $957,700 in the same month (Martin Hanbury 23). This means that after calculating my clients targets, I am also supposed to make a considerable profit in order to sustain my clients and prove to them that my assumptions are profitable for them. Analysis of my position i. Assumptions My current position assumes that my clients will be able to secure their respective investments through the time tranching structure which my firm will employ. This will guarantee their continued long term investment and profit longevity. ii. What are you trying maximize? By investing in pension funds and insurance companies, we will be trying to maximize on both profits and long term investment and Pension funds and insurance companies will ensure this. iii. Any recommendations? I would recommend that we increase investments especially in Pension funds and insurance companies. This is because even though they are somewhat risky to invest in, they are also quite lucrative. Conclusion As we have observed from the above, it is quite clear that the time tranching structure is the most appropriate approach to utilize in order to safeguard my clients investments. It is also considerably profitable for Genuine Investment Bank to invest in Pension funds and insurance companies in order to maximize on the firms profits. Works Cited Haley, Michael A. and McMurtry, Lara. Equity Trusts. London: Sweet Maxwell. 2011. Print. Hudson, Alastair. Understanding Equity and Trusts. Abingdon, Oxon: Routledge. 2013. Print. Martin, Jill E. and Hanbury, Harold Greville. Modern Equity. London: Sweet Maxwell. 2012. Print. Pearce, Robert A., Stevens, John and Barr, Warren. The Law of Trusts and Equitable Obligations. Oxford: Oxford University Press. 2010. Print.