NEWS UPDATE: Mortgage funds still good
The market troubles have not had a direct impact on Australia’s mortgage fund sector, which continues to offer opportunities to investors, according to funds management firm, Australian Unity Investments.
AUI retail general manager Adam Coughlan said investors were in danger of “throwing the baby out with the bathwater to the long term-detriment of their portfolio,” particularly as interest rates are due to fall.
According to Coughlan, investors have somewhat over-reacted to recent bad news surrounding a number of high yield mortgage funds having suspended withdrawals and been placed ‘on hold’ by research houses.
“But investors in mortgage funds shouldn’t automatically assume that their investment is at risk. Well run mortgage funds are inherently stable and secure investments,” he said.
“There are mortgage funds which are continuing to deliver good performance, that are invested in first mortgages and have low levels of arrears and appropriate levels of liquidity. In short, they are continuing to achieve the goals that they first set out to achieve.”
Coughlan added that there has been a shake-up in the sector but in the long run this should benefit investors, given significantly reduced competition from banks and other lenders.
“In addition, mortgage funds also pay investors regular monthly income, which is something term deposits aren’t equipped to do.”
“With term deposit returns falling away, mortgage funds will only become more competitive, and today our mortgage team is writing loans with lower risk and higher margins than we have been able to since 2001, which is very good news for investors,” Coughlan said.
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