Retail investors remain cautious when it comes to investing in the mortgage fund space, due largely to the impact of the global financial crisis but also the change in the liquidity offer and the implementation of the deposit guarantee, according to Australian Unity Investments head of mortgages Roy Prasad.
"Flows are fairly thin from a retail perspective and it's only natural older investors – and most mortgage funds are generally supported by retirees – are tending to favour investment options like term deposits rather than mortgage funds," he said.
"With what has transpired over the last two to three years, there have been some spectacular failures within the sector, more at the high-risk end.
"Unfortunately it tends to weigh down the entire sector and when investors do experience a problem with a particular fund, that deters the rest of them [so that they] are more cautious and stay away."
Perpetual launched a retail mortgage fund offering, the Perpetual Private Capital Income Fund, in March but made the decision to withdraw it in early April due partly to a lack of investments.
Warwick Boys, Perpetual's general manager, institutional business, income and multi sector, said that the structure of the retail mortgage fund market is not currently conducive to opening such a fund.
He said that no funds were raised for the fund, and institutional investors were a more suitable proposition in relation to investing in mortgage funds because they have a greater capability and motivation to participate in what he considers to be an illiquid proposition.
