Quality mortgage loans are finding growing appeal in the self-managed super fund (SMSF) sector as trustees search for yield in a low interest rate environment, said Jonathan Street, CEO of specialist commercial property lender Thinktank.
Thinktank, which recently launched two investment trusts, said it is discovering a nascent market for its product among SMSF trustees, who are attracted to the yield minus the volatility and uncertainty of the share market.
“We have been pleasantly surprised by the initial interest in the two products. No doubt recent share market volatility has helped our cause, as well as the negative focus on bank shares in the wake of the Royal Commission, but none of this can detract from the genuine investor interest in the two products,” Street said.
He said investors must be convinced about the quality of the underlying assets (Thinktank targets borrowers seeking mortgage secured commercial property finance between $100,000 and $3 million) to be assured liquidity will not be an issue.
“The history of mortgage trusts buying property assets means it’s critical to have an investment portfolio that is highly liquid so there is a greatly reduced capital impediment for those investors wishing to redeem,” Street said.
“It means the portfolio – Thinktank manages a loan book of $820 million comprising 1,200 first mortgages – must be transparent, with investors having full knowledge of what the trusts are investing in.
“In our experience, SMSF trustees are canny investors. They either get specialist advice or do their own homework before making an investment decision, especially when its outside the traditional asset classes of blue-chip equities and cash.”