Mortgage trusts slowly finding favour again

Mortgage trusts are beginning to be accepted by investors as a longer-term income-generating asset not simply a short-term cash-like proposition, according to SQM Research's 'Mortgage Trust Sector Review'.

The freeze on mortgage trusts in late 2008 weakened investor confidence, with many mortgage trusts unable to survive after re-opening, the report stated.

According to SQM, the sector has since generally addressed such issues as the traditionally low yields offered by such trusts and moving from a policy of daily redemptions to less frequent withdrawal periods of monthly, quarterly or yearly redemptions.

Related News:

A number of new mortgage funds have also chosen to move away from the traditional performance benchmark (the USB Australia Bank Bill Index) by ether utilising a different benchmark or adding a premium over the benchmark, the review stated.

SQM added that it did not find the current benchmark for the mortgage industry appropriate.

Despite the review finding that between December 2002 and December 2011 mortgage funds reported positive returns, they have also experienced a gradual decrease in funds under management (FUM) since December 2007.

According to the review, FUM fell 18.9 per cent for the year to December 2011, in contrast to the 24.3 per cent fall for the year to December 2010.

As part of its review, SQM increased its overall rating of La Trobe Australian Mortgage Fund - Pooled Mortgage Option from 3.75 stars to 4 stars, giving the fund the highest rating.

Coming in second, Provident Capital Monthly Income Fund was also upgraded, going from a 3.5 to a 3.75 star rating.

The Australian Unity Wholesale Mortgage Income Trust remained unchanged at 3.75, while two newly-reviewed funds - the Perpetual Private Capital Income Fund and the Balmain Mezzanine Income Trust - both received a rating of 3.5, according to the report.

SQM stated that in the current market environment, mortgage funds are providing investors with an attractive notion, capital stability and regular income streams. 

Related Content

Aus Unity grows investments business

Australian Unity has made two strategic appointments to its investments business, with George Cupac joining as head of private markets and institution...Read more

Aus Unity appoints new fund manager

Australian Unity Investment Real Estate has appointed Marky Lumby, who joined the firm in 2011, as Australian Unity Office Fund’s (AOF) new fund man...Read more

Australian Unity appoints head of partnerships

Australian unity has announced the appointment of Benson Saulo as its new head of partnerships, wealth and capital markets.He would take up a new...Read more



Add new comment