Fund managers have sorted out mortgage funds for retail market
The liquidity issues that caused a number of mortgage funds to be frozen at the height of the global financial crisis have been addressed and these funds can now offer retail investors a relatively stable income investment option, according to Trilogy Funds Management director John Barry.
He said fund managers had learned from the experiences of the financial crisis and have since imposed shorter loan terms, limited exposure to individual borrowers, lower loan-to-value ratio limits and longer withdrawal notification periods.
"The creases have been ironed out by those fund managers and what's left is an investment that offers relatively stable returns, a decent rate and capital preservation," Barry said.
"While it's understandable that retail investors remain cautious about the sector, it's important they're aware of the role that mortgage trusts can play in boosting portfolio income, particularly as term deposit yields look less and less attractive."
Recently, Trilogy re-launched its mortgage trust, extending the notice period required for redemptions from the trust from one month to four months.
"The loans written by traditional mortgage trusts were simply too big and too long-term to cope with what was once perceived as an 'at call' redemption offering," Barry said.
"Investors and advisers need to appreciate this fact."
Barry's comments come after Money Management yesterday reported that investment manager Perpetual decided to withdraw its retail mortgage fund offering (Perpetual Private Capital Income Fund) in April only a month or so after being launched.
Recommended for you
Women are expected to inherit US$124 trillion through the intergenerational wealth transfer, but Capital Group has found they are twice as likely to rely on social media for advice over a financial adviser.
Challenger Investment Management has raised $350 million during the offer period for its new ASX-listed investment structure.
A week after Lonsec downgraded multiple funds from Metrics Credit Partners, rival research house Zenith Investment Partners has opted to retain its ratings for the same funds.
Strong adviser engagement has helped Praemium reach $1 billion in inflows on its Spectrum offering, with a deal with Western Australian wealth firm Euroz Hartleys expected to add as much as $2 billion.
