VCAPX Fund Outperforms Benchmark During Q1

IRVINE, CA—The Vertical Capital Income Fund continued to outperform its benchmark during the first quarter of this year, bringing a return of 3.14% as compared with a 1.58% return for the Barclays US Mortgage-Backed Securities Index. In addition, the fund declared a dividend of nearly $0.13 during the quarter.

With the fund's maximum 4.5% sales charge, the return for the first quarter was -1.52% The fund was created by Vertical Capital Markets Group, which also manages it.

For the one-year period ending March 31, VCAPX produced a return of 9.34% (4.4% after the maximum sales charge), compared with a return of 0.2% for the benchmark MBS Index. Since its inception, VCAPX has produced a return of 8.62%, or 6.43% with the sales load, compared with a return of 1.21% for the MBS Index. Its SEC annual yield was 4.8% as of March 31.

According to Bayard Closser, president of Vertical, “VCAPX continues to outperform its benchmark because of a high level of interest income and lower interest-rate sensitivity than the benchmark.”

Moving forward, fund investors could benefit from the fund's lack of correlation with either stocks or bonds, says EVP John Harline. “Historically, stocks and bonds have been negatively correlated, but in recent years the Federal Reserve Board's easy money policy has boosted both stock and bond prices in sequence, reducing the common inverse relationship between asset classes.”

Harline adds that with stocks potentially undervalued, bonds vulnerable to rising interest rates and money-market funds paying close to 0% interest, investors need an alternative asset with non-correlation or negative correlation to stocks and bonds to achieve diversification and reduce risk. However, diversification doesn't ensure profit or prevent losses. “Because they have little or no correlation with stocks or bonds, whole mortgage notes can help investors achieve the true diversification they need today, especially as the Fed continues tapering its bond buying.”

The fund's assets under management, which more than tripled last year, grew nearly 25% during the quarter and totaled slightly more than $73 million as of March 31, up from nearly $58.7 million on Dec. 31, 2013. VCAPX trades on NASDAQ and is available for a minimum investment of $5,000, or $1,000 for retirement accounts.

As GlobeSt.com reported in February, whole mortgage notes is an alternative real estate investment opportunity that is plentifully available when the market is strong and wanes when the market is suffering. As we move further away from the Great Recession, there are still opportunities for whole-mortgage-note investment, but these opportunities are waning, Vertical Fund Group principals Christopher Chase and Gus Altuzarra told GlobeSt.com.