Investment Q&A

MRSE is a small ($52M) closed end fund focusing on real estate securities. It trades at a 1.7% discount to net asset value. Indicated yield is 6.8%. The dividend has not changed since its listing (2022). It rose about 6% last year. 74% of its holdings are REITs, with 17% building materials companies. It has too short of a history to solidy endorse, but we would consider it OK for general real estate exposure. It should perform better if rates decline. It sells options against its bank positions, and has an indicated yield of 15%, but note it has seen some dividend declines recently (the rate will vary). Its one year return is -2% as banks did not perform well last year. Still, we like HMAX as we believe that Canadian banks will be a good play in the future, along with paying a high distribution. We are comfortable with its strategy of enhanced yield, though keep in mind in a market rally it still might lag straight equity ETFs as fund positions get called away. But for investors specifically looking for enhanced income, we think it can be a useful tool in a portfolio. With the current outlook, we would be comfortable keeping it.