Read enough investment marketing and you'll see the words "yield" and "return" used almost interchangeably. They are not the same thing — and the difference can be the gap between what a portfolio earns and what actually lands in your account. Understanding it is one of the most useful skills an income investor can have.
Two words, two very different meanings
At the highest level, yield usually describes what an underlying portfolio generates, while return describes what an investor actually earns after costs. A fund can advertise an impressive yield while its investors take home meaningfully less.
Often a gross figure — the income produced by the underlying assets (for a mortgage fund, the interest on its loans) before the fund's own fees and expenses. Frequently quoted as a "target" or "portfolio" yield.
The result to you after management fees and fund expenses. This is the number that reflects your real experience as an investor — and the one to focus on when comparing options.
Why the two numbers differ
Several things sit between a portfolio's gross yield and an investor's net return:
- Management and administration fees. The cost of running the fund is deducted before you're paid.
- Fund expenses. Audit, legal, custody, and operating costs reduce the amount available to distribute.
- Cash drag. Money waiting to be deployed into new loans typically earns less than money already invested.
- Timing and compounding. Whether distributions are paid out or reinvested changes what you ultimately earn over time.
None of this means a yield figure is dishonest — it simply answers a different question. The key is knowing which number you're looking at.
"Target," "historical," and the fine print
Two more distinctions matter when you read performance figures:
Target vs. actual. A "target" yield is a goal, not a promise. It describes what a fund aims to generate — not what it necessarily has generated. Always look for the actual, after-fee return alongside any target.
Past vs. future. Historical returns describe what happened under past market and credit conditions. Those conditions may not repeat. This is why regulators require the reminder that past performance is not indicative of future results — it's not boilerplate, it's the point.
- Is this number a yield or a return — gross of fees, or net to me?
- Is it a target, or an actual figure the fund has achieved?
- Over what period, and under what conditions, was it earned?
- What fees and expenses apply, and how do they affect what I receive?
- Does it assume distributions are reinvested, or paid out in cash?
How we present our own numbers
We hold ourselves to this standard. Where our materials show a target or portfolio yield, we also disclose the actual, after-fee return earned on our Class A shares, along with the period it covers and the reminder that past performance does not guarantee future results. You'll find the full basis of our figures — and the risks — in our Disclosures and Fund Fact Sheet. We'd rather you understand the numbers than simply be impressed by them.
