Investors seeking ‘sturdy’ mortgage trusts

According to SQM Research’s Annual Australian Mortgage Trusts Sector Review, funds under management increased by an average of 37.5 per cent for the year to December 2015.

“Overall, the mortgage trusts on offer to investors have been moulded into sturdy investment products that match the liquidity profile of the underlying loans,” SQM Research managing director Louis Christopher said.

“As a consequence, we have observed that investor confidence in the sector is improving with a net increase in reported funds under management.”
SQM Research’s review covered funds from La Trobe, Australian Unity and EQT.

The review found that contributory mortgage structures (or peer-to-peer mortgage funds) are increasing their prevalence in the market. Many new products from fund managers such as Australian Unity were released in the market in 2015.

For each of the funds reviewed, returns were reflective of the underlying risks inherit of their mortgage portfolios.

While investor confidence was increasing, Mr Christopher said investors needed to be cautious when investing with “less recognised operators”.

“There are still some issues with regard to certain financial products offered by investment product providers on the fringe which have not been properly tested or even researched by a third party,” he said.

[Related: Investors gain access to prime credit markets]