22nd October 2008

Dear Investor,

Mortgage Fund Returns

Following on from last week's Investment News we discussed the importance of keeping to investment fundamentals. Risk versus Return is another important consideration when choosing where to invest your money.

There are four (4) main investment asset classes: Cash, Fixed Interest, Equities - Australian & International and Property. Each has a risk versus return scale with Cash considered the lowest risk and therefore offering a modest return on your investment and Property regarded as the highest risk in the group, but with the potential to provide a much higher return.

Mortgage funds fit into the Fixed Interest sector of the market. Therefore across the four main asset classes, mortgage funds are generally considered to be of a medium to low risk profile.

Linked to risk is also the scope for volatility and this should also be taken into consideration.

The graph below shows the performance of the La Trobe Australian Mortgage Fund against the downturn periods of the Australian stock market over a 10 year period. The graph depicts a positive return from the La Trobe Australian Mortgage Fund at the same periods when the Australian stock market was experiencing negative returns. The steady positive return is the nature of the Fixed Interest asset class where the La Trobe Australian Mortgage Fund fits*. When the stock exchange is in a positive market, the Fixed Interest asset class may not provide returns as high as the stock market, so therefore volatility in the fixed interest sector is usually minimal in comparison.


Click image to enlarge

Last week an article in the Australian Financial Review, "Cash, property shine as shares crash and burn" suggested that investments in cash or property over the last 10 years had come close to or even potentially out performed the return from equities over the same period.

The volatility in the share market that we have seen in recent times has eroded many of the gains made in equity investments prior to the 'credit crunch' where the market had previously performed strongly. With the fixed interest sector returning similar or higher returns why should investors tolerate the extreme volatility of the share market without the appropriate returns for such risk?

The La Trobe Australian Mortgage Fund, however, recorded a positive average return of 10.18%*p.a. between November 2007 and July 2008 when, for the same period, the Australian stock market experienced a downturn of -24.4%p.a. (see graph above). That is why mortgage investments, properly managed, can be a very strong defensive asset allocation for investors*.

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.