A private mortgage fund’s preferred return structure determines more than a distribution schedule — it sets the economic relationship between investors and the manager across the fund’s life. This article explains how cash-on-cash and accrued preferred return structures work, what each means for investor protection and manager incentives, and how to choose the right structure for your fund.
This case study walks an illustrative private mortgage fund through a preferred-return arrearage cycle on the accrued waterfall framework, the loss-reserve drawdown against a portfolio loss event, and the recovery framework that restored the fund's waterfall discipline. The facts are illustrative and run against [...]
The quarterly waterfall calculation runs the fund's distributable cash against the four-tier framework on the operating-agreement discipline. This article walks the six-step framework against each quarter — from the cash framework through the reserve framework, the four-tier waterfall, and the investor-reporting framework.Step 1: Calculate [...]
Private mortgage funds run the waterfall framework against the fund's operating agreement on the quarterly distribution cycle. Seven mistakes recur on the waterfall execution framework, and each runs the fund into an investor-trust framework or a tax-reporting framework against the lender-investor base or the [...]
A private mortgage fund runs the distribution framework against the fund's operating agreement on a defined distribution cycle — the quarterly cycle on the standard. The distribution framework runs the cash from the fund's mortgage portfolio against a tiered allocation framework — the waterfall [...]
Private mortgage fund managers run recurring questions on the §3(c)(5)(C) exemption framework. This article answers the questions on the framework discipline, the asset-classification framework, the testing framework, and the corrective-action framework against a §3(c)(5)(C) violation.What does §3(c)(5)(C) exempt the fund from?Section 3(c)(5)(C) runs the [...]
Private mortgage funds choosing between §3(c)(1) and §3(c)(5)(C) face fundamentally different structural disciplines. The right exemption turns on projected investor count, asset composition, and operational capacity — not just the statutory text.
This case study walks an illustrative §3(c)(5)(C) mortgage fund through a qualifying-interest test failure on the measurement date, the auditor finding against the exemption framework, and the asset-rebalancing cycle that restored the fund to compliance. The facts are illustrative and run against a composite [...]
A five-step framework for mortgage fund managers to calculate, classify, and document the §3(c)(5)(C) 55% qualifying-interest floor and 80% real-estate-related asset floor on each quarterly measurement date.
Section 3(c)(5)(C) of the Investment Company Act of 1940 runs the real-estate exception against a private mortgage fund primarily engaged in the business of purchasing or acquiring mortgages and other liens on and interests in real estate. Seven mistakes recur on a mortgage fund [...]
