16th July 2008

Dear Investor,


Liquidity. This word has appeared numerous times in the media, particularly in the last 18 months. So, what does it mean and why is it so important?

In financial terms it means how easily you can convert your money from an investment into cash. Generally speaking, the harder or longer it takes to convert your investment into cash, the more 'illiquid' it is considered. For example, if you invest directly in a property it is considered 'illiquid' because it can take you months to recover your funds, as you need to advertise, sell and then settle the property before you can retrieve your cash. A transaction account at the bank is considered 'liquid' because you can redeem your money at anytime, at a moment's notice, and with Automatic Teller Machines (ATMs) and Electronic Funds Transfer at Point of Sale (EFTPOS) the banks don't even have to be open.

Like all investments the returns will vary greatly depending on asset class, risk and liquidity factors. The more 'liquid', or easily redeemable your investment, generally, the lower the rate of return.

In the current market environment, in particular in relation to the global 'Credit Crunch', liquidity is extremely important. Cash is becoming increasingly scarce in the market place as investors, corporates and individuals withhold their cash from investments due to the uncertainty of the market direction. What this means is that there is much less cash moving around the economy, which increases the cost of credit.

Liquidity is important for all portfolios whether they are billion dollar funds managed by Fund Managers or individuals managing their own savings. If you are still working it is suggested that the equivalent of about three month's pay should be available in cash, or at a minimum, one month's pay. Most retirees on the other hand should normally have a minimum of 5% of their portfolio or 1 year expenses in cash.

What does La Trobe do to maintain liquidity in the fund?

La Trobe is methodical in its management of liquidity, reviewing it on a daily basis. Maturing investments and redemption patterns are continuously monitored by our Fund's Portfolio Manager, Mr Jason Gidman, and Assistant Portfolio Manager, Mr Kirk Jackson. Jason and Kirk ensure that liquidity is maintained in line with the levels determined to be appropriate for the investment option throughout its investing cycle.

How can you make the most of your liquid assets?

For investment balances not requiring immediate or short term liquidity, term deposits are one option. Term Deposits offer a rate of return, if you are prepared to lock in your funds anywhere between 6 months to 5 years, currently in the vicinity of 8.15% p.a. and upwards. However, your funds are still locked away and depending on your risk appetite there may be alternative investment options that would provide a better return for your locked in funds. La Trobe's Pooled Mortgages Option presently offers 8.25% p.a. variable for a 12 month investment term.

If you are looking for more flexibility with your cash you may want to consider a Cash Management Account (CMA). By investing in a CMA:

  • You pool your money with that of other investors
  • A professional money manager looks after it in order to ensure you receive a good return
  • As a full time dedicated manager, and generally of a large sum of money, a managed fund may have the opportunity to invest at higher interest rates and therefore may offer an increased return for the investor

CMAs usually come with a minimum investment amount and a range of features such as interest re-investment, which compounds your return and helps to grow you savings, but this will vary from fund to fund.

It's worth keeping in mind that most CMAs are rated highly by the various independent rating agencies. Do remember, however, that higher rates usually mean higher risks, and always review the investment policy of CMAs that offer returns significantly above competitors' rates.

As at 1 July 2008 the La Trobe Pooled Mortgages Option and Cash & Mortgages Option offer the following opportunities for investing with an active liquidity management policy.

Best regards,
Chris Andrews


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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.