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Sentry Select MBS Adjustable Rate Income Fund II provides exposure to a portfolio of U.S. mortgage-backed securities which have an actual or implied AAA rating. These securities represent an ownership interest in pools of residential mortgages. The Fund provides a monthly stream of cash distributions targeted to approximate the annual average of the 10-year U.S. Treasury Note yield, plus 3.00 per cent.
Using its assets as collateral, the Fund borrows to invest in additional U.S. mortgage-backed securities. The spread between income on securities and the cost of borrowing determines the returns. As at September 30, 2008, the Fund employs 3.4x leverage.
Investors benefit in several key ways:• Monthly distributions• Tax-efficiency, as distributions are primarily capital gains and return of capital• Enhanced portfolio diversification, since mortgage-backed securities as an asset class are not correlated to stocks or bonds • A secure investment, with high-quality mortgage-backed securities having virtually zero credit risk exposure • Currency hedge, protecting the portfolio’s value against changes in U.S. and Canadian currency exchange rates
Average Annual Compound Returns - by Market Price (as of May 29, 2009)
Annual Returns - by Market Price
2008
-
0.50
% of Net Assets
46.0
40.0
39.9
32.3
23.9
20.7
20.3
18.8
17.5
17.0
14.1
13.6
13.0
11.5
11.0
10.5
9.6
9.1
7.7
7.2
6.9
6.6
4.8
Mortgage-Backed Securities Limited Partnership - Summary of Investment Portfolio (as of March 31, 2009)