2nd April 2008

Dear Investor,

Steady Income In Unsteady Times

Each year we get asked by numerous investors . . . are bricks and mortar investments such as mortgage funds safe havens? The latest residential price indicators showing strong increases across the nation could not have come at a better time. With many investors considering a diversification of assets away from the stock market, the sight of some property markets - Melbourne, for example - rising by 20% is clearly compelling.

However some investors seem to be considering a quick foray into property to capitalise on predictions that some sectors of some markets will continue to show similar price increases throughout 2008.

What many have latched onto is the annual median house and unit prices released by Australian Property Monitors several weeks back and published in all major newspapers. These national, composite figures came during a period of continued stockmarket dive and showed Melbourne, Brisbane and Adelaide recording spectacular price growth above 20% while Sydney lagged, registering a rise of just 5%.

Headline writers made much of the fact that Melbourne, if it continued at this pace in 2008, would catch up to and even overtake Sydney as the least affordable city in Australia. They didn't emphasise the "if". Melbourne surpassing Sydney is highly unlikely, but it's the sort of speculation that makes investors refocus on property.

The first question the "novice investor" seriously needs to ask is, "Why do I want to invest in property and why now?" A simple question? You bet! And the answer is crucial.

If it's because the investor is exiting the stockmarket and wants to park some funds in property related assets in the short term, with a view to making a big profit based on expectations raised by short-term data, then our answer is equally simple, "Put the money in the bank."

If, on the other hand, the investor has made a firm commitment to using property to create wealth over the long term, then it's a case of studying the ground rules before plunging in - particularly in relation to careful and correct asset selection and taking a considered, educated view of property and how it works as a long-term strategy.

With property, the bottom line is ensuring the asset will perform consistently over time and through a variety of economic conditions and influences. We urge all investors to pay attention to preservation and protection of existing wealth-creating assets. If an existing property investor is secure in the level of capital growth, long-term potential for ongoing growth and in their ability to financially service the investment, then some strategic and diversifying planning needs to be applied to any additional purchases.

Many have predicted that price growth will continue to diverge across the major cities. Sydney is predicted to remain subdued. Perth and Adelaide are expected to cool after hitting peaks last year and analysts predict Melbourne (the standout in 2007) may see rises in the most sought-after investment property sectors in the order of 5-8%. They predict that we may, repeat may, see some increases of around 10% in the early part of the year when the market opens off the back of pent-up demand left over from last year's strong close. But that is likely to apply to very specific assets in specific inner city (20km radius from the GPO) locations.

Once investors have taken a careful and educated approach to correct asset selection in what may initially be an unfamiliar asset class, the most consistent, long-term growth properties will usually outperform the second-rate ones this year, next year and the year after.

But, anybody who thinks there are quick "windfalls" to be had over the next six months to a year in the residential property market is not only barking up the wrong tree, they're just plain barking!

In times like this, some investors panic and some make a fortune. Of course many people are also busy selling out of shares and digging into bricks and mortar via Mortgage Funds.

Property, the trusty staple of the Australian investor diet is being eyed longingly again by many who just want to be able to walk through the front door of their investment and not through the front door of their broker worried about the volatility of their money.


Best regards,
Chris Andrews

QUICK LINKS

> Home
> About Us
> PDS - Want to invest?
> FAQs
> Subscribe Free
> Independent Ratings
> Mortgage Shopping List



Chris Andrews
Head of Funds Management

t  +61 3 8610 2811
e  candrews@latrobefinancial.com.au

Chris Andrews is the Head of Funds Management for the La Trobe Group and has responsibility for the La Trobe Australian Mortgage Fund.
Read full profile here.










La Trobe is one of Australia's leading independent specialist mortgage Financiers. Its business includes residential mortgages, commercial mortgages, and investment services operating one of Australia's largest Mortgage Funds under AFSL 222213. It employs over 115 staff and has raised over AUD$10Billion to assist over 100,000 customers since inception in 1952.

Copyright 2010 La Trobe Financial. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial. Disclaimer



* La Trobe Financial Asset Management Limited ABN: 27 007 332 363 and AFSL No: 222213 is the issuer and manager of the La Trobe Australian Mortgage Fund. It is important for you to read the Product Disclosure Statement for the Fund before you make any investment decision. You can get a copy of the PDS by calling 1800 818 818. You should consider carefully whether or not investing in the Fund is appropriate for you.
(1) The rates of return from the Fund are not guaranteed and are determined by future revenue of the Fund, and may achieve lower than expected returns. Past performance is no guarantee of future performance. Investors risk losing some or all of their principal investment.
(2) Withdrawal rights are subject to liquidity and may be delayed or suspended.
(3) As at 30/11/10 the La Trobe Australian Mortgage Fund had received a Morningstar RatingTM of 5 stars. The Morningstar Rating is an assessment of a fund's past performance - based on both return and risk - which shows how similar investments compare with their competitors. A high rating alone is insufficient basis for an investment decision. © 2010 Morningstar, Inc. All rights reserved. Neither Morningstar, nor its affiliates nor their content providers guarantee the above data or content to be accurate, complete or timely nor will they have any liability for its use or distribution. Any general advice has been prepared by Morningstar Australasia Pty Ltd ABN: 95 090 665 544, AFSL: 240892 (a subsidiary of Morningstar, Inc.), without reference to your objectives, financial situation or needs. You should consider the advice in light of these matters and, if applicable, the relevant product disclosure statement, before making any decision. Please refer to our Financial Services Guide (FSG) for more information at www.morningstar.com.au/fsg.pdf
(4) 3.75 star rating out of a possible 5 star rating indicates that Adviser Edge believes that La Trobe has performed in line with its peers and exceeded its peers on some fronts.
(5) The Standard and Poors rating of 4 out of 5 stars indicates that S + P has high conviction that La Trobe Financial will consistently generate risk-adjusted fund returns in excess of its relevant investment objectives and relative to its peers.
(6) The award was given to the La Trobe Australian Mortgage Fund, Pooled Mortgages Option.
Research Ratings are subject to change. To view the latest research information please visit www.adviseredge.com.au or www.standardandpoors.com.au. Ratings issued by Adviser Edge Investment Research AFS Licence No. 236783 and Standard & Poors Information Services (Australia) Pty Ltd AFS Licence No. 258896 are solely statements of opinion and not statements of fact or recommendations to purchase, hold, or sell any securities or make any other investment decisions. The ratings are only one factor to be taken into account in deciding to invest. Research Houses receive a fee from La Trobe for rating the product. The Adviser Edge rating is generally a measure of the rated entity's capacity to meet its repayment obligations in all market circumstances.
IMPORTANT: This message, together with the La Trobe Financial website (www.latrobefinancial.com.au) and all its contents have been prepared for general information only and should not be taken as legal or financial advice, and as such the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Individuals should therefore talk with their financial planner or advisor before acting on any information present on this message or the La Trobe website.