Mortgage trusts have a future, says Australian Unity

Investors will start going back to mortgage funds once they get over the noise and remember that the problems of the last 18 months were not the underlying assets, according to Australian Unity’s general manager of property mortgages and capital markets, Mark Pratt.

“Everything that you’ve read about mortgages in the last 12 months is bad,” he said. “If the only thing you ever read about mortgage investments is bad, it’s hard for the industry to turn that around.”

He said the problems of the last 18 months have been rooted in access to funds.

“It’s been ad hoc, it’s been limited. But if we give people certainty around their liquidity or greater access to their funds, we will see the same thing that is happening with our property vehicles,” he said, adding that interest in unlisted property was picking up as it was a great time to invest.

Pratt said while investors may get onto mortgage funds tentatively, eventually their experience of quality managers would alleviate their concerns that they may not get access to their money. He said over the last 18 months, Australian Unity had done what it said it would do for investors.

“Just making sure that when they want their money, they get their dollar back – it’s not at a discount, which is really important for us,” he said, adding that Australian Unity would reap the benefits in being able to provide that experience to investors.

Pratt said when it came to rebuilding the reputation of the sector, progress has been slower than anyone would have liked. But he said Australian Unity’s focus had been on restructuring liquidity facilities and re-educating advisers and investors about where mortgage funds fit in a portfolio.

“The main thing that people want out of a mortgage fund is their dollar back,” he said. “We’ve managed the funds more prudently to make sure that we deliver that, and we have and we will continue to do that going forward.

“But how do we structure a new liquidity facility for mortgages? The days of daily redemptions out of mortgage funds will sadly not come back, and necessarily as long-term assets matched against daily liquidity is not the right structure for investors.”

Pratt said for retirees they wanted to be able to provide regular income that was competitive with term deposits and capital-based products, with access to capital over time. He said eventually investors would base investment decisions on that rather than all the noise that there is no future for mortgage trusts.

“We want to get to a position where mortgage trusts stand on their own two feet as an investment option,” said Pratt. “We absolutely believe that there is a future for mortgage trusts and it is our role to re-educate new or existing clients about what that means for them going forward.”