Morningstar removes first mortgage funds from on-hold status

morningstar/investors/

20 April 2009
| By Benjamin Levy |

Morningstar has upgraded the first of the on-hold mortgage funds, Challenger’s Howard Wholesale Mortgage Fund, to investment grade status, but has warned investors to be mindful that there are still short-term liquidity challenges for the sector. Challenger was one of many mortgage funds in the sector to be placed on hold after redemptions in many funds were frozen in late 2008.

Chris Douglas, an investment researcher at Morningstar, said that the increasing changes to the structure of the mortgage funds to monthly or quarterly redemptions clearly reflected that the underlying assets in the mortgage funds were not liquid assets.

“The episodes last year reflected that a lot of people really started using mortgage funds as a cash proxy, and that’s clearly not the correct way of using them,” he said.

The mortgage funds would be more suitable for investors looking for a regular income stream in a longer-term investment horizon, according to the report.

The majority of mortgage funds do have liquidity issues, Douglas said, and investors must understand that short-term liquidity is still an issue. However, mortgage funds could provide an excess return above cash in the longer-term environment.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

So we are now underwriting criminal scams?...

4 months 3 weeks ago

Glad to see the back of you Steve. You made financial more expensive, not more affordable as you claim, and presided ...

5 months ago

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

7 months ago

Commonwealth Bank has formally dropped to zero advisers following LGT Crestone’s acquisition of its advice arm – some six years on from the Hayne royal commission. ...

3 weeks 4 days ago

The FSCP has issued a written direction to an adviser who charged clients “extraordinary fees” for inappropriate and conflicted advice, as well as encouraged them to swit...

1 week ago

ASIC has cancelled the AFSL of an advice firm associated with Shield and First Guardian collapses, and permanently banned its responsible manager. ...

2 weeks 3 days ago

TOP PERFORMING FUNDS

ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
92.15 3 y p.a(%)
3