28 October 2009
La Trobe’s Mortgage Fund - the Pooled Mortgages Option
Many of our readers are familiar with the four investment options that are available
in the La Trobe Australian Mortgage Fund.
This Investment News focuses on the Pooled Mortgages Option.
The Pooled Mortgages Option, as the name suggests, pools investors’ money to invest
in a wide range of first mortgages in Australia, diversified by both sector type
and geographic location. The Option currently invests in nearly 300 different mortgages.
The initial investment term is for 12 months, and the maximum loan to valuation
ratio for mortgages in the Pooled Mortgages Option is 75% (the actual average is 60.0%).
One of the key strengths of the Pooled Mortgages Option, as confirmed over the last
18 months, is the stability of its returns. The Option is often discussed in the
same context as cash and term deposit investments, but the experience of the last
18 months shows that these types of investments are not as stable in terms of returns
as once was expected. It is important to note that the Pooled Mortgages Option is not
a term deposit.
The chart below demonstrates that mortgage investment returns have remained remarkably
stable over the last 5 years, in a time of considerable volatility. Over the last
5 years, the Pooled Mortgages Option’s annual return has averaged 7.5% and remained
stable between 7.0% and 8.0% p.a. If monthly distributions were re-invested, the
range was 7.2% and 8.3% p.a. compound.
In this vein, the investment return for the Pooled Mortgages Option will increase
from 1 November 2009 to 7.15% variable p.a, from 6.95% variable p.a.
Click image to enlarge
In addition, the Pooled Mortgages Option, with its high quality asset base, has
been able to maintain both asset values and distributions. Over the last 18 months,
fixed interest type assets, such as some bonds, have experienced dramatic loss of
capital value, overturning the common perception about the risks associated with
these assets. The value of our mortgage investments is not linked to the market
and their capital value is not exposed to this instability. The assets of the Pooled
Mortgages Option have performed consistently over the years and there is no reason
to expect a deterioration in performance in the future. Furthermore, the security
enhancement to the Pooled Mortgages Option, through its dedicated cash reserve, has
again increased over the last year. Both the asset quality and the dedicated cash
reserve affirm the Option’s strong capital security position.
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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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