24 June 2010
Dear Fellow Investor,
The Pooled Mortgages Option equal highest rated mortgage fund in Australia!
La Trobe is pleased to announce that Standard & Poor's has released its annual ratings paper in relation to the Pooled Mortgages Option, as well as the annual sector review. These papers have confirmed La Trobe's three star rating as the equal highest rating received by any mortgage fund in Australia.
This outstanding ratings result comes on top of Money magazine awarding La Trobe the "Best Mortgage Fund in Australia" for 2010 and Smart Investor ranking La Trobe as the reigning top performing mortgage fund in Australia.
Who is Standard & Poor's?
Standard & Poor's is one of the world's pre-eminent independent ratings houses.
It has been providing investors with independent research and performance benchmarking for 150 years.
A comprehensive and independent review of La Trobe's Pooled Mortgages Option
For a number of years now, Standard & Poor's has been conducting a fully
independent review of La Trobe's Pooled Mortgages Option. This review
encompasses all aspects of the fund's operations, including its investment
objectives and philosophy, the strength of the investment team and processes,
the risk and liquidity management approach, the strength of its portfolio and
its long-term performance.
At the end of the review, Standard & Poor's compiles a research paper outlining
its findings. It also provides an overall fund rating. A three star rating means that:
"Standard & Poor's has conviction that the manager will generate risk-adjusted fund returns in-line with its relevant investment objectives and relative to its peers."
What comments were made about La Trobe?
Pleasingly, Standard & Poor's made a number of very positive comments about La Trobe in their ratings paper. Not only did
it award the Option three stars, but they were at pains to emphasise that their "conviction [in the fund's ability] continues to strengthen."
It is particularly pleasing to get a glowing note of support like this at a time when most other mortgage funds are either frozen, or experiencing difficulties. Whilst we will never rest on our laurels, we are pleased to receive this endorsement from a widely respected independent ratings agency.
In addition, Standard & Poor's commented that:
- It has conviction in La Trobe's ability to meet its objectives.
- La Trobe has been able to deliver stable income returns and capital preservation for investors, with investors suffering no losses since inception of the Pooled Mortgages Option in 2002.
- La Trobe has outperformed all other like mortgage funds in Australia.
- La Trobe has a long track record in managing loans.
- La Trobe's senior management is stable.
- La Trobe's investment process is well documented and articulated.
- The fund has good diversification, whether considered geographically or simply as a function of the number of loans in which it invests (438 separate loans as at 31 May 2010).
How does La Trobe compare to other funds in the sector?
In its review of the broader mortgage fund sector, Standard & Poor's made a number of observations relevant to La Trobe. In particular,
it noted that:
- 47 funds were rated, but as many as 30 funds remain 'on hold' due to problems experienced on the back of the global financial crisis.
- The highest rating was 3 stars (the rating received by La Trobe)***
It specifically referred to La Trobe on a number of occasions, including the following:
- "La Trobe's Australian Mortgage Fund... has continued to perform very well"
- "The relatively strong performance of the high-yield mortgage fund median relative to the conventional mortgage fund median is solely attributed to the performance of the La Trobe Australian Mortgage Fund - Pooled Mortgages Option. It remains open and has performed over the subgroup benchmark over one, three and five years to February 2010.
- "We highlight that La Trobe's Pooled Mortgages Option... has successfully grown FUM [fund size] throughout the GFC..."
Why has La Trobe performed so strongly?
From La Trobe's perspective, there are a number of reasons why the Pooled Mortgages Option has outperformed its competitors so consistently. Two of the most important are:
- La Trobe knows mortgages
La Trobe has been lending to borrowers throughout Australia since 1952. We have lent over $10 billion to over 100,000 borrowers. That sort of experience means that we know the market intimately and have a recognised market 'niche' from which we can source the
preferred loans for investors.
As a result, the Pooled Mortgages Option has 438 loans (as at 31 May 2010) diversified across Australia. The maximum allowable investment in any one of these loans is just $1,000,000, the average investment size is about $200,000 and the average loan to value ratio is just 60%.
- Mortgage funds are a term investment
Classically, the mortgage fund was designed to provide investors with capital stability and returns in excess of what could be obtained in cash. Because this involved investing in mortgages with terms of one year or longer, an investment in a mortgage fund was always an investment for a set term.
However, in recent years, many mortgage fund managers forgot this basic principle and offered their investors access to their funds at short notice (frequently even 'at call'). To do this, they effectively had to set aside a proportion of every dollar invested to meet redemption requests. This did not produce good results for two reasons:
Of course, when many mortgage funds met with a surge of redemption requests in 2008-09, they were unable to meet them. So not only have their investors received poor returns (frequently lower than those available from cash investments), but in many cases their investments are still frozen and are unable to be redeemed.
- It reduced the amount of money that could be invested in income-generating
mortgages (thereby reducing returns to investors); and
- It was always going to be insufficient to meet unusually high demand for redemptions by investors.
By contrast, La Trobe has always required a 12 month term investment for the Pooled Mortgages Option3. This better matches the underlying investment asset (mortgages), thereby producing a better return for investors (best in Australia over 1, 3, 5 and 7 years according to independent ratings agency Morningstar#) and avoiding any liquidity stress. At no time in the Pooled Mortgages Option's history have distributions or redemptions had to be frozen or restricted.
Can I read the ratings paper and sector review in full?
La Trobe would be pleased to provide you with a full copy of the ratings paper and sector review. They are available on our website at www.latrobefinancial.com.au or by contacting our dedicated investment specialists on 1800 818 818.
How can I invest?
To invest in the Pooled Mortgages Option (currently paying 7.65% p.a. variable1), Cash & Mortgages Option (currently paying 6.20% p.a. variable1) or one of La Trobe's Select mortgages (paying from 7.60% p.a1), please complete the
Application form attached to the Product Disclosure Statement available electronically from the link at the top of this email or from our dedicated investment specialists on 1800 818 818.
La Trobe Investment Team
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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