Spreads, Recessions and Returns

Spreads, Recessions and Returns

Commercial mortgages can be somewhat insulated from short term economic fluctuation caused by change or contraction during a business cycle. This is due to the nature of the term of a mortgage contract and the existence of multiple layers of security and promises to pay.


Loans are supported by the ‘covenants’ (promise to pay) of multiple tenants. All tenants, through rental agreements, promise to pay a fixed sum of rent over a fixed term. This payment is directly pledged to the lender as security. There is usually no fluctuation in this income stream over the term of the lease or rental agreement.

Commercial mortgages are generally underwritten such that net property income is greater than 1.45x annual debt service. This means the property income can shrink substantially before there is any strain on the borrower to meet its mortgage payments. Cash flows can ebb and flow over short and medium terms with limited effect on a commercial mortgage.


These factors add to the level of security for capital seeking a stable destination.

Fund Introduction

The mandate of Pendfund Income Fund I is to provide Investors fixed-income, a functional return and secured capital.

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Risk Management

Pendfund Income Fund I invests in a low-risk asset class maintaining a minimum of 70% investment grade mortgage loans in its portfolio.

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Small Loans and Demand

There is a steady and solid demand for these loans and Pendfund Income Fund I meets this demand.

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