Income producing hedging strategies – Things you need to know

There are two types of hedging strategy in the property market – one is what's called "insurance strategy", and the other is called a "portfolio strategy". The difference is that the insurance strategy is essentially a value coverage, which costs money to operate. The portfolio strategy generates income, and as well as providing value coverage.

The major points:

Insurance-based coverage may increase in market value over time. The value of the mortgage, for example, may go up if a second mortgage is taken out or for other reasons. This type of coverage may be sold for a higher price.

Portfolio strategy receives income from mortgage servicing rights, which may or may not also include value-added components if the value of the mortgage increases. Portfolio strategy assets can also be sold in the market.

Both strategies are widely used in the market. The big issue is whether or not the income producing strategy is better than the insurance strategy.

The major difference is that the insurance strategy approach costs money. It doesn't actually generate income directly, like the portfolio strategy.

Now the major issue – These hedging strategies are supposed to hedge. Hedge investment is about risk management and generating values as hedges. The pro-portfolio strategy view is that because portfolio hedging generate income, it naturally generates more value over time.

The area of contention here is the difference between a passive hedging strategy and an active strategy. United capital market specializes in the portfolio hedging investment strategy. If you'd like to out more about how this strategy works, visit our website here at http://ucm-inc.com/.