Fidelity’s top management team: (L-R) Manager of Banking Services and Business Development Jim McLean; CEO and President Brett Hill; and Manager of Credit, Pierre Claassens. (Photo by Steve Knipp)

Principals of Fidelity Bank & Trust International Limited are in the advanced stages of launching the Cayman Mortgage Opportunity Fund.

Exclusively designed for the Cayman market, the principle objective of the Fund will be to invest in a diversified portfolio of fully performing residential mortgages originated by the Fidelity Group’s wholly-owned subsidiary, Fidelity Bank (Cayman) Limited. Fidelity Cayman has been engaged in the originating of mortgages in the Cayman Islands for nearly 30 years.

Fidelity Group Chairman Anwer Sunderji said: “It is anticipated that the Fund will provide higher returns to investors compared with traditional bank deposits and money market funds. In addition, the Fund will offer an extra level of diversification, as returns from mortgages are not closely correlated with returns from other asset classes. Adding a mortgage security to an investment portfolio can reduce volatility and risk.”

Mr Sunderji adds that the current global economic turmoil has highlighted the downside of investing all domestic pension savings overseas.

“Millions of dollars of Caymanian pension funds are invested in other economies benefiting their development instead of ours. A Cayman investment vehicle, such as the Cayman Mortgage Opportunity Fund, allows the savings from Caymanians to be deployed towards growing the local economy.”

Fidelity Cayman CEO Brett Hill said, “Fidelity has become an active participant in the Cayman mortgage market over the last few years and as a result of its innovative and service-based approach, has far exceeded even its most ambitious growth expectations. In order to continue to meet the high demand for its mortgage loan products, the bank will transfer certain of its mortgages to the Fund and allow investors to participate in the lucrative Cayman mortgage market.”

He also says that “only performing and well-structured” mortgages linked to prime will be acquired by the Fund initially.

On a further note, Mr Hill said, “There is a lack of long-term fixed income investment securities that provide reliable returns and are linked to the growth and prosperity of the Cayman Islands. The Fund will help address this deficiency”

At the initial launch of the Cayman Mortgage Opportunity Fund, it is expected to have assets between $10 and $20 million. The average size of acquired mortgages is expected to be approximately $200,000. Principals suggest the Fund will benefit from having a large and diversified pool of mortgages (of varying amounts and terms), and strict underwriting criteria, in terms of loan to value ratios and debt service ratios.

The Fund will be unitized and all the cash flow (principal and interest) will be available for distribution on a quarterly basis. Investors may choose to reinvest in the Fund or to receive quarterly cash distributions. The Fund is also structured to offer two classes of shares, one for retail investors with a minimum investment of $10,000, and the other for institutional investors with a minimum of $500,000.

Subject to Regulatory approval, Fidelity Bank & Trust International, through a wholly owned management company, will act as investment manager and provide all mortgage administrative services.

Royal Fidelity Merchant Bank & Trust, the joint venture company owned by Royal Bank of Canada and the Fidelity Group, will provide custodial and trustee services.