23 September 2009

Dear Investor,

La Trobe's Mortgage Fund - a genuine alternative

"Increased recognition of the value of retail deposits means that there are now three distinct types of deposit accounts on the market", says La Trobe's Head of Funds Management, Paul Wells. Broadly speaking they fall into the following camps:
  • online savings accounts;
  • cash management accounts; and
  • term deposits.
There are daily transaction accounts on top of these, but we have not included them in the discussion that follows.

Importantly, all three types of accounts are very different in what they offer, and selecting the right one for your purposes is essential if you are to make the most of your money.

Many consumers who want to put their money in a savings account often do not know what suits them best. It's not surprising, given that La Trobe understands that there are no less than 83 online savings accounts, 116 cash management accounts and multiple term deposit options available in Australia right now.

The differences between online savings accounts, cash management accounts and term deposits are all distinctly defined, but before choosing the right type of deposit account, you should first determine what features are important to you and which ones you are likely to use.

Are you happy placing your savings in an online account and not touching these funds very often? Is money going in and money going out constantly a more likely scenario? Or is the money to be minded safely in a term deposit until the share market settles down?

The table below outlines the relative advantages and disadvantages of each type of deposit account in helping you choose what's right.

Online Savings Account
Pros Cons
Highest interest rates with some beating the cash rate of 3% Most are required to be linked to a transaction account
Seldom require large minimum balances Cannot directly access money externally (only through the transaction account)
Most do not charge an account keeping fee Some interest rates may take the form of bonus rates or introductory rates
Seldom are there conditions attached to the eligibility to earn the high interest rates Most do not offer transaction facilities
 
Cash Management Account
Pros Cons
High interest on high balances High interest only payable on high balances (low balances only earn low interest rates)
Transaction facilities attached eg: ATM facilities and branch access Most have a large minimum opening and ongoing deposit
  Many charge an account keeping fee
 
Term Deposits
Pros Cons
High fixed interest rates Interest rates are fixed for the term. No opportunity to earn potentially higher interest rates
Special promotions may attract exceptionally high interest rates Fixed terms. Early withdrawal may cause interst earned to be reduced significantly
Instills the discipline of not withdrawing the money during the term of the deposit  

Each example allows different access to your money, and the return on your investment is paid accordingly.

For those looking at either a cash management account, an online savings account, or a fixed income return, La Trobe offers a competitive alternative with its award winning Mortgage Fund. Comprising a number of Options, the Fund has received awards from the Money Magazine 'Best of the Best' awards in 2007, 2008 and 2009 for the Cash Mortgages Option, and this year the Pooled Mortgages Option was placed second to a now frozen fund in the Best Mortgage Fund category in the Money Magazine awards.

There are two Options in La Trobe's Mortgage Fund that offer a combination of features that mean that they can be regarded as genuine alternatives to online savings accounts, cash management accounts and term deposits.

La Trobe's Cash & Mortgages Option provides 24 hour access(3) like the online savings accounts and cash management accounts, together with a very competitive interest rate - currently 5.25% p.a.(1) variable. Only $1,000 is required to get you going, interest is calculated daily and credited monthly and there are no ongoing account fees.

La Trobe's Pooled Mortgages Option is similar to a term deposit in that the minimum investment term is 12 months(3), and this Option currently pays 6.95% p.a.(1) variable. Again, only $1,000 is required to get you going, interest is calculated daily and credited monthly and there are no ongoing account fees.

In both Options, the interest rate is calculated on the actual balance in your account, so your total investment is working hard for you.

However, you must balance the risk associated with an investment against the rewards generated by that investment, namely the rate of interest paid, and weigh the pros and cons in making your decision where best to place your hard earned savings.

In looking at the Options within La Trobe's Mortgage Fund, you must remember that while many online savings accounts, cash management trusts and term deposits are offered by banks, La Trobe is not a bank and an investment in La Trobe's Mortgage Fund is an investment in a managed investment scheme. While the rates offered by the Options in La Trobe's Mortgage Fund are generally higher than online savings accounts, cash management accounts and term deposits offered by banks, La Trobe's Options are correspondingly higher on the risk scale of investments than a bank.

It's your money, so take the time to understand what you are investing in. Once you've had a look at what's on offer, we think that you will find that investing in the Cash & Mortgages Option or the Pooled Mortgages Option of our Mortgage Fund are genuine alternatives to online savings accounts, cash management accounts and term deposits.


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.