Trust sees brighter future
SINCE the Federal Government declared it would guarantee bank deposits at the height of last year’s global financial meltdown, most mortgage trusts around the nation have been forced to freeze investor funds.
Now a couple of North Coast mortgage funds have issued product disclosure statements designed to partially ‘unfreeze’ the savings of those who want them now.
“With the full support of our auditors and legal advisors we have put out a revised product trying to offer a different, and we think better, product for our investors,” said Ian Cardow, managing-director of Ballina-based Richmond Mortgage Fund, which froze its $70 million fund in October, 2008.
The mortgage trust sector has been shaken more than most by the financial crisis and it is now grappling with ways to get it back on its feet and return to what it does best – long-term investments.
In the lead-up to the financial meltdown, some investors were tending to use trusts like at-call bank accounts, which put increasing pressure on the liquidity of the trust’s investments.
When the Government guaranteed bank deposits, trusts had to freeze their funds to prevent a stampede of investors leaving for the risk-free banks, as this would have forced trusts to sell their mortgage investments in a mass fire sale.
To get back to the basics, and allow as many investors as possible to get their money back quickly while not undermining the ongoing investments the trust has made on behalf of other investors, Richmond Mortgage Fund and Lismore-based East Coast Mortgage Trust have recently developed similar innovative approaches that are being watched across the country as a possible future model for the industry.
Essentially, the Richmond Mortgage Fund is divided into two streams or options: One for those wanting a regular income from long-term investments, and investors who require regular access to their funds.
Mr Cardow said the company had just completed its fourth redemption offer – paying investors – since the fund was frozen.
However, the fund got some bad publicity last week when a national media report incorrectly implied that it was attempting to raise more money from investors while the company’s auditor was warning the whole sector could go under.
Nothing could be further from the truth, according to Mr Cardow and auditor Darran Singh, of Thomas Noble & Russell.
Mr Singh told The Northern Star the comment in his auditor’s report, on which the inference was based, was a legally necessary disclosure based on the state of the industry in September last year, not the viability of Richmond Mortgage Fund.
He said he had full confidence in the fund and there would be no need for such a disclosure in this half-yearly financial statement, due to be released within days.
“I have had no pressure from the company and I don’t hang my head in saying it,” Mr Singh said.
“They (Richmond Fund) are trying what they can do to get money out for people who want it while pro-actively managing the rate of return for those who want to stay.”
It is understood the 42-year-old Richmond Mortgage Trust’s half-yearly result will show its units, which investors purchase for $1 each, are still of that value, unlike other high-profile national funds..