22 July 2010
Dear Fellow Investor,
The Select Mortgages Option – choice for discerning investors
In recent times, we have taken many queries from investors interested to learn more
about the Select Mortgages Option of the La Trobe Australian Mortgage Fund. In this
edition of Investment News, we take the microscope to this outstanding investment
What is ‘property debt’?
The Select Mortgages Option is first and foremost an investment in “Property
“Property debt” is an asset class in which investors invest in debt that
is owed by a borrower and that is secured by property. In essence, investors
contribute all or part of a loan to a borrower. In return, the investors
- An income stream generated by the loan repayments; and
- Security in the form of the mortgage and/or other securities provided by the borrower.
Property debt is an ‘income-generating’ asset class, rather than
a ‘capital growth’ asset class. By utilising mortgages and other types of securities,
property debt also aims to provide a measure of capital stability.
In a diversified investment portfolio, income generating asset classes
like property debt are frequently used to “balance” capital growth assets. Further,
such asset classes often increase in importance as investors approach and then reach
retirement. In such circumstances, investors often increase the proportion of their
portfolio in income-generating assets so that they can preserve their capital base,
whilst generating income on which they can live.
What is the Select Mortgages Option?
Although private investment in property debt has a long history in Australia, most
publicity about the asset class these days tends to be about institutional investment,
via superannuation funds and the like.
La Trobe’s Select Mortgages Option has been specifically designed to allow private
investors to access this important asset class. In creating the Option, La Trobe
has drawn on its nearly sixty years of lending and funds management experience.
How does the Select Mortgages Option work?
Even if they do not invest in the stock market, most investors are familiar with
the basic principles of direct investment in shares. First, investors carefully
select a specific company in which they would like to invest. This decision is often
influenced by factors such as the required rate of return, the industries with which
they are familiar and performance of the companies they are considering. Once the
decision is made, investors then purchase shares in the company that they have chosen
through a broker.
The Select Mortgages Option brings the same principles to bear for investment in
property debt. Investors get to select the specific debt in which they would like
to invest. As with stock market investing, this decision is influenced by the required
rate of the return, the type of security property underpinning the investment and
the credit history of the borrower. Once the investment decision is made, investors
invest via a ‘Supplementary Product Disclosure Statement’ (“SPDS”) in the
specific loan that they have identified.
How do investors select a specific property debt?
Each week, La Trobe publishes a ‘Mortgage Shopping List’ of available property debt
investments. The current shopping list can be seen by clicking the link at the top
of this email. It provides a range of different property debt investments across
Investors can identify which of these investments suit their personal investment
objectives and then contact La Trobe’s dedicated Investor Liaison team on 1 800
818 818. Investors will then be provided with a detailed SPDS, including a full
copy of the valuation report of the security property securing the borrower’s debt
and a report on the credit history of the borrower.
Simply by executing and returning the SPDS, investors will have secured for themselves
an investment in the specified property debt (minimum investment: $1,000). Interest
rates vary from loan to loan. Speaking broadly, they tend to start at around 8%
p.a.1 and increase from there.
Who might be interested in the Select Mortgages Option?
As discussed, all investors with a diversified portfolio are likely to have some
exposure to income generating investment classes. These classes are likely to increase
in importance to an investor as the investor nears and then reaches retirement.
The Select Mortgages Option will also be particularly attractive to active investors
who like to exercise a large degree of control over their investments. Over time,
these investors tend to develop a significant degree of expertise in selecting the
investments that suit their own investment appetites.
How do I learn more?
To learn more about our Select Mortgages Option, please call our friendly Investor
Liaison team on our toll free Investor Services number 1 800 818 818. As previously
mentioned, our shopping list can be accessed from the link at the top of this email.
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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