The pressure on diversification in a portfolio has never been greater, with volatility in most markets, but the mortgage fund sector
still offers plenty of good opportunities for investors, says Mr Adam Coughlan, general manager - retail at Australian Unity
Investments.
He said that investors are in danger of throwing the baby out with the bathwater to the long-term detriment of their portfolio,
particularly as interest rates start to fall.
“Recently, we have seen some investment sectors come under scrutiny because of bad news from a couple of funds.
“Mortgage funds are a good example of this. In the last few months, a number of high yield mortgage funds have suspended
withdrawals, and been placed ‘on hold’ by research houses.
“But investors in mortgage funds shouldn’t automatically assume that their investment is at risk. Well run mortgage funds are
inherently stable and secure investments.
There are mortgage funds which are continuing to deliver good performance, that are
invested in first mortgages and have low levels of arrears and appropriate levels of liquidity. In short, they are continuing to achieve
the goals that they first set out to achieve.
“Investors who have sold out of perfectly good mortgage funds and put all their money into cash accounts or term deposits have put
themselves at the mercy of rapid changes in interest rates which have already started to fall, with further decreases likely.
“In addition, mortgage funds also pay investors regular monthly income which is something term deposits aren’t equipped to do.
“With term deposit returns falling away, mortgage funds will only become more competitive, and today our mortgage team is writing
loans with lower risk and higher margins than we have been able to since 2001, which is very good news for investors,” Mr Coughlan
said.
The latest Lonsec review, released last week, acknowledges challenges in the sector but states that “Lonsec considers Australian
Unity’s portfolio construction and credit assessment process to be robust, transparent and well-documented” and that “Australian
Unity (is) a highly capable manager with a long track record in the mortgage fund sector”. The Australian Unity High Yield Mortgage
Trust retained its “Recommended” rating in the review, even in light of Lonsec’s comments that “recent events in the high yield
property lending sector, such as the failure of a number of competing funds, have highlighted the current extent of operational
difficulty for mortgage funds in that area”.
Mr Couglan said that there has been a shake-up in the sector but in the long-run this should be to the benefit of investors, given
significantly reduced competition from banks and other lenders.
Australian Unity Investments is the funds management arm of financial services, health and retirement living services provider
Australian Unity. It has over $6.4 billion in funds under management. Its investment approach is to use its established in-house
expertise in property and mortgages while also forming joint ventures and strategic alliances with other organisations with specialist
expertise.
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For further information please contact:
Adam Coughlan
Phone: 03 8682 4476
Email : acoughlan@australianunity.com.au
Australian Unity Funds Management Limited ABN 60 071 497 115 AFSL No. 234454 is the issuer of interests in the Australian Unity
High Yield Mortgage Trust and has prepared this press release for general information only. It does not take into account your
current or future financial circumstances; you should consider these matters and read the relevant Product Disclosure Statement,
which is available from australianunityinvestments.com.au or by telephoning 13 29 39, before making an investment decision on
holding or acquiring this product.