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CHICAGO-Deerfield Triarc Capital Corp. hopes to increase its allocation of investments outside mortgage-backed securities to more than 45% over the next 12 to 18 months. Those "alternative assets" are expected to generate higher returns than the residential or commercial mortgage-backed securities, company officials say during their earnings conference call this week.

The company's RMBS portfolio increased 15.6% to $8.1 billion in the first quarter, compared to $820.2 million in alternative investments, according to Deerfield Triarc Capital's earnings report. However, the structured mortgage REIT has the ability to tap $300 million from Wachovia Bank to increase investments in senior corporate debt, preferred stock and other investments. "It has the ability to do some real estate also," says chief financial officer Richard Smith. "I anticipate that over time, we'll find some real estate opportunities to take advantage of."

However, Deerfield Triarc Capital has been passing on deals lately because of pricing, unwilling to compete with some of the less disciplined capital. "We will continue to be selective in the growth of this part of the DFR portfolio in order to achieve attractive returns without sacrificing credit quality," says chief executive officer Jonathan Trutter.