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June 2019

New income solutions in a low-yield world

The year 2008 seems like a lifetime ago. Kevin Rudd had recently been elected Prime Minister, with good friends Julia Gillard and Wayne Swan as his deputy and treasurer respectively. Brendan Nelson picked up the mantle of opposition leader (beating out Malcolm Turnbull) and succeeded one of Australia’s longest ever serving Prime Ministers as leader of the Liberal Party. And the official cash rate of the Reserve Bank of Australia was 7.25%. Ah those heady days.

Little did investors know that we were about to enter a period of what can now surely be described as secular stagnation. The Global Financial Crisis, high levels of indebtedness and demographic forces drove the developed world into an extended period of low growth, low inflation and – unhappily for savers and retirees – record low interest rates.

By 2014, the signs, in our view, were clear. The forces working against inflation, wages growth and economic activity were so strong that we made the call that interest rates would remain within 0.5% of the then-prevailing official rate (2.5%) for a decade. Initially, we looked incredibly pessimistic. Most commentators were predicting that rates would ‘revert to the mean’ and begin a slow, but steady increase to more normal, meaning higher, levels. As it turned out, we were excessively optimistic. Not only did interest rates decrease, but they have continued to decrease and now sit at an incredible 1.25%. And – five years into our decade-long call - the markets are expecting at least two and possibly three further cuts, as the graph below shows!

Source: ASX

As usual, the media coverage of this incredible phenomenon focuses on the positive effects that lower rates can have on existing mortgage holders. As usual, the extraordinarily adverse effect on savers, investors and retirees generally is almost entirely ignored. Take a couple who worked hard, raised a family (paying 18-20% on their mortgage in the early 1990s, by the way) and saved hard to put together a nest egg to provide for a dignified retirement. Who is speaking for them? Who is talking about the difficulty of living a dignified retirement when the interest rate paid to savers and investors is so low?

Those are the investors that La Trobe Financial is focussed on assisting. For almost seven decades we have built a track record and reputation based on one simple mission – being a good steward of other people’s money. We know that our investors have worked incredibly hard and sacrificed much for their savings. We make it our singular purpose to put that money to working hard for them.

New Product Disclosure Statement

For that reason, it gives us enormous pleasure to announce the release of the new Product Disclosure Statement (PDS) for our $3.5 billion Credit Fund. As of 24 June 2019, the new PDS takes effect and all investors are bound by its terms and conditions. A copy of this PDS can be seen by clicking on the PDS icon below.

The 90 Day Notice Account – a new solution for investors

A key innovation in our updated PDS and product offering is the new 90 Day Notice Account. It is a welcome addition to La Trobe Financial’s investment product suite and offers short-medium duration investments at an initial investment rate of 3.10% per annum (variable) paid monthly. The 90 Day Notice provides investors with a stable source of monthly income, together with access to their funds with 90 days’ notice. This positions it neatly between La Trobe Financial’s existing 48 hour Account (2.6% at 1 July) and 12 Month Term Account (5.20% at 1 July) in terms both of yield and duration.

Most importantly, the 90 Day Notice Account is built on the same investment disciplines and asset class expertise that La Trobe Financial has been employing for almost seven decades.

Rates applicable at 1 July 2019

Other Product Updates

The PDS has a greatly enhanced look and feel for our investors and introduces a number of important features to our Credit Fund, including:

With interest rates at record lows and set to go lower, investors have few realistic choices for capital stable sources of consistent income. The La Trobe Financial team is committed to delivering on that space for all of our 38,000 investors.

Whatever your situation and whichever offering you choose, you should know that the team of 380 professionals at La Trobe Financial is working hard to ensure that your savings and investments are put to work. More than ever, whatever your situation, La Trobe Financial has a capital-stable, income-generating account for you.

Please call our friendly investor team on 1800 818 818 with any queries, or download Australia’s leading online investment app from the Apple store or Google Play. Visit latrobedirect.com for more information.


About La Trobe Financial

With A$9 billion of Assets Under Management (AUM), La Trobe Financial is Australia’s premium non-bank specialising in credit and wealth management. La Trobe Financial provide funding and investment solutions to a diverse range of 150,000 customers and have done so since 1952. 80% owned by Blackstone, the world’s largest alternative asset manager, with over US$545 billion of AUM worldwide. We are a proven and trusted investment partner for institutional and retail investors alike, operating Australia largest retail Credit Fund ($4bn AUM and 40,000 retail investors). We have over 66 years’ experience, managing investment mandates in excess of $22.76 billion since commencement.

La Trobe Financial has been a leading innovator in the non-bank sector for many years including, pioneering “Lite Doc®” lending in Australia in 1990, creating the first private Reverse Mortgage (Seniors Loan™) in 2003, launching the first hybrid wealth management-loan product P2C® (Parent-to-Child) to assist first home buyers in 2013, introducing a unique to market Aged Care finance solution in 2015, and being one of the first lenders to introduce a fully digital KYC and AML checking of borrower applicants for brokers in 2017.

La Trobe Financial Services Pty Ltd ACN 006 479 527 Australian Credit Licence 392385. La Trobe Financial Asset Management Limited ACN 007 332 363 Australian Financial Services Licence 222213 Australian Credit Licence 222213 is the issuer and manager of the La Trobe Australian Credit Fund ARSN 088 178 321. It is important for you to consider the Product Disclosure Statement for the Credit Fund in deciding whether to invest, or to continue to invest, in the Credit Fund. You can read the PDS on our website www.latrobefinancial.com, or ask for a copy by phoning us on 13 80 10.

This publication does not constitute financial advice and should not be relied upon as such. It is intended only to provide a summary and a general overview on matters of interest and it is not intended to be comprehensive. You should seek your own financial or other professional advice before acting or relying on any of the content. Copyright 2019 La Trobe Financial Services Pty Ltd ACN 006 479 527. All rights reserved. No portion of this may be reproduced, copied, or in any way reused without written permission from La Trobe Financial.

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