Mortgage funds strong

several years, mortgage funds have been the weak sisters among fixed-income investment options. However, the decline in short-term interest rates in the first half of the year plus a recent rise in longer-term rates has brought them to the forefront.

Because mortgage maturities are relatively short, these funds perform in much the same way as short-term bond funds. The climate in the first half of ‘01 suited them perfectly. Not one fund in the category lost money and most scored six-month gains in the 3% range — not bad for a low risk investment, especially with rates as low as they are.

In fact, all the funds in this category have an excellent safety record. Several have not lost money in a calendar year at any time going back to the early 1990s. Among those with that unblemished streak are HSBC Mortgage, National Bank Mortgage, Royal Mortgage, and TD Mortgage.

No, they’re not very exciting. But right now excitement isn’t the number one priority on many investors’ lists.

From the Aug. 2001 edition of Mutual Funds Update, a monthly newsletter edited and published by Gordon Pape. For a free three-moh trial subscription to the electronic edition, go to