PIMCO enters the mortgage REIT business.

PIMCO is getting into the mortgage REIT business. 

http://www.bloomberg.com/news/2011-07-05/pimco-reit-agrees-to-slash-fee-if-residential-mortgage-fund-loses-money.html

What is its unique selling proposition?  In other words, why would I want to invest in PIMCO’s REIT instead of Annaly Capital (NLY) or American Capital Agency Corp. (AGNC)?

The trouble with these mortgage REITs is that the management is compensated for the size of their shareholder equity.  Offering additional shares is the easiest, fastest way to grow their equity through the use of 6x-8x leverage.

Avoid the mortgage REITs if you are a long term investor.  Traders can make some money before these REITs implode due to rising interest rates.

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Published in: on July 6, 2011 at 4:40 pm  Leave a Comment  

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