1st October 2008
Know who you are investing with
"Economic Meltdown", "Financial Market Turmoil", "Billions Lost" are some of the news headlines that we have seen in the press in the last few weeks. Does all this sound like the story of Chicken Little, who was walking in the woods when — KERPLUNK — an acorn fell on her head and she exclaimed "Oh my goodness!" "The sky is falling! I must go and tell the King."?
The one thing to keep in mind is "Know who you are investing with".
So, with the global economic and financial environment in turmoil, fluctuating interest rates, and a number of Australian financial institutions such as MFS, Centro, City Pacific, Babcock & Brown and Allco in trouble, we thought that we should reiterate for investors the conservative differences and strengths of the La Trobe Australian Mortgage Fund's investment profile and the key strengths of La Trobe as the Responsible Entity of the Fund:
- La Trobe specialises in making loans secured by registered mortgages over Australian properties; it's all we do, and it's where our expertise lies. We have been lending for over 50 years, and we've successfully negotiated the ups and downs of the markets over that time. We do not manage any other types of assets.
- The La Trobe Australian Mortgage Fund is exactly that - a mortgage fund. It is not a property fund, and does not invest in property. The Fund lends money on the security of Australian property. The average amount lent by the Fund by way of mortgage is only 60% of the independently assessed property value.
- The Fund has no borrowings whatsoever and in the underlying mortgages we are almost invariably the first mortgagee on title.
- The Fund invests in a portfolio of mortgages broadly diversified by geography, security type, loan purpose and loan size, the latter averaging approximately $275,000. Construction and development loans represent less than 15% of Fund's investments. The Fund only lends to a limited number of select construction and development projects at a time and we don't undertake any construction developments ourselves.
- La Trobe does not have any relationships with property trusts, either listed or unlisted, and we don't lend to property trusts.
- The La Trobe Group is not listed on any Stock Exchange - so the Group is unaffected by the day-to-day turbulence of the stock markets, and we are not exposed to margins loans or short selling, which many investors will have read about.
- Neither La Trobe nor the Fund has any credit exposure to the US sub-prime mortgage markets.
- The Fund was established by La Trobe in 1999 and is registered with the Australian Securities & Investments Commission ("ASIC") as a managed investment scheme.
- La Trobe Financial Asset Management Limited, the responsible entity of the Fund, holds Australian Financial Services Licence No. 222213.
- The Pooled Mortgages Option of the Fund has been independently rated by PIR and S&P, and both research houses will be undertaking update reviews over the next few months.**
There is nothing new in the world except the history you do not know. Harry Truman
When the Dow sheds 700 points in a day, it's natural to feel doomed. And when the market eventually surges, which history suggests that it most likely will, it's easy to be convinced that stocks have entered a "new paradigm", to echo a bubble-era phrase. Don't delude yourself. As Sir John Templeton noted, "The four most expensive words in the English language are, 'This time it's different.'"
To keep your perspective, remember:
- In every bull market since 1970, stocks have dropped 10% or more at least once. Average time to get back to even: 107 days.
- Over time, markets tend to stick close to their long-term trends. It's called "regression to the mean". Remember, manias, panics and crashes rarely last.
**You can obtain a copy of the ratings reports by visiting our website www.latrobefinancial.com.au. The rating is only one factor to be taken to be taken into account in deciding to invest.
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Head of Funds Management
t +61 3 8610 2811
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.
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