Mortgage winners stick to what they know

Remaining “true to label” and having well established teams and processes are some of the key factors in the success of this year’s finalists in theMoneyManagement/AssirtFund Manager of the Year mortgages category.

This year’s winner,Challenger International, holds a five-star rating from Assirt and has managed large fund flows without compromising its portfolio, according to Assirt head of research Caroline Saunders.

Challenger Howard mortgage management head, Steven Kyling, says the manager has maintained its cash level at 20 per cent while generating record inflows of $1.1 billion for the financial year to date, rather than turning to “more volatile” fixed interest options, as some other managers in the sector have.

“Staying true to label is why we have been able to maintain our returns quite competitively,” Kyling says.

Focusing on providing 48-hour turnarounds for the small to medium loan market, maintaining good relationships with referring brokers, as well as monitoring the trust’s exposure to inner-city residential investment, have been important components of Challenger’s strategy, according to Kyling, in addition to a strong demand for commercial lending driving inflows.

Assirt says Challenger’s strategic alliance with Westpac has contributed to the manager’s strength by providing access to the distribution of a much larger and more established financial institution.

Although a newer and smaller player in the mortgage market with a fund of $156 million, finalistAustralian Unityhas also kept a careful eye on asset allocation to maximise fund performance.

With 86 per cent of Australian Unity’s mortgage income trust actually in mortgage holdings, and the remaining 14 per cent in cash, Australian Unity has the highest mortgage holdings in the sector, according to mortgages portfolio manager Roy Prasad, who has been heading the team since 1998.

Australian Unity senior portfolio manager Manno Simos says the group has maintained a strict adherence to credit quality and risk management through diversification across sector geography and loan origination, which Assirt also highlights as strengths.

“Australian Unity’s lending guidelines and processes are strong, its risk management processes are clearly documented and adhered to, and it has good diversification across different sectors and geography,” Saunders says.

Last year’s winner, mortgage stalwartPerpetualInvestments, made it onto the list of finalists this year, receiving the nod from Assirt for its “great procedures, well managed portfolios and consistent and conservative approach”.

Perpetual also has an experienced mortgages team, led by head of fixed interest Marion Kraemer.

“Because we have been in the market for quite a long time, we have an established group of borrowers who come back to us,” Kraemer says.