Exiting a mortgage note fund.

[Scott Holland]

I've seen a mortgage note fund on here, and it sounds appealing. However, how do you exit that type of vehicle. Is it like other syndication funds and in 5 years the fund settles with you. Or do you just notify the sponsor that you are exiting? Just kinda looking for some high level lifespan structure of this type of investment.

Thanks,

Scott

[Scott Trench]

Obviously this varies by fund. I've looked at funds recently that have lock-up periods that vary. For example, if you commit to 6 months, there might be a lower interest rate, 12 months, a higher rate, 2 years, still higher, and 3-5 years, the highest. It should be clear once you begin seriously exploring what the commitment is. Funds that can't make those promises (like a syndication deal or private equity fund instead of a note fund) should offer premium returns to compensate for the lack of liquidity. 

This is a question that the sponsor should be able to answer directly. Sometimes, the smaller fund sponsors are willing to be flexible with liquidity needs - as long as it doesn't impact fund operations and they have some excess cash on hand.