Fund managers have sorted out mortgage funds for retail market
The liquidity issues that caused a number of mortgage funds to be frozen at the height of the global financial crisis have been addressed and these funds can now offer retail investors a relatively stable income investment option, according to Trilogy Funds Management director John Barry.
He said fund managers had learned from the experiences of the financial crisis and have since imposed shorter loan terms, limited exposure to individual borrowers, lower loan-to-value ratio limits and longer withdrawal notification periods.
"The creases have been ironed out by those fund managers and what's left is an investment that offers relatively stable returns, a decent rate and capital preservation," Barry said.
"While it's understandable that retail investors remain cautious about the sector, it's important they're aware of the role that mortgage trusts can play in boosting portfolio income, particularly as term deposit yields look less and less attractive."
Recently, Trilogy re-launched its mortgage trust, extending the notice period required for redemptions from the trust from one month to four months.
"The loans written by traditional mortgage trusts were simply too big and too long-term to cope with what was once perceived as an 'at call' redemption offering," Barry said.
"Investors and advisers need to appreciate this fact."
Barry's comments come after Money Management yesterday reported that investment manager Perpetual decided to withdraw its retail mortgage fund offering (Perpetual Private Capital Income Fund) in April only a month or so after being launched.
Recommended for you
GQG Partners has completed the acquisition of the minority interests held by Pacific Current Group in three affiliates which will form its new Private Capital Solutions division.
The wealth management firm has unveiled a new fund in partnership with investment specialist Partners Group, describing the investment solution as an “alternative” to traditional alternatives.
Fidante affiliate NovaPort Capital has announced the closure of its small cap and microcap funds, citing expected declining flows.
T. Rowe Price believes Australian growth is successfully managing to shrug off consumer weakness, but the firm’s multi-asset team is not yet positive enough to increase its underweight position.