Mortgage funds outcome in balance

Investors in mortgage funds are unlikely to know before at least the middle of the week whether the Federal Government is prepared to make further significant changes to the arrangements that have seen growing numbers of funds freezing redemptions.

The Investment and Financial Services Association (IFSA) and other industry representatives are meeting with the Government in Canberra today in a bid to find a way through the situation confronting mortgage funds and their investors, but much also depends on the policy positions being recommended by the Treasury in league with the Australian Securities and Investments Commission.

In the meantime, another fund has joined the growing number freezing redemptions, with the Advance Mortgage Fund announcing that it had closed applications and redemptions on Friday while ING Funds Management said it had suspended all applications and redemptions from its Mortgage and Income Plus funds.

The IFSA delegation to Canberra is being led by the organisation’s chief executive Richard Gilbert, who told Money Management that the situation confronting the mortgage funds was one of the biggest issues to face the industry.

He said that in circumstances where 13 of the top 20 mortgage and property funds had frozen redemptions, IFSA would be working hard to work through the issues with the Government.

At the same time as seeking some adjustments from the Government, key spokesmen for many of the mortgage funds along with at least one key ratings house have been reinforcing that the suspensions in redemptions have nothing to do with their underlying strength of quality but, rather, with current liquidity issues.