by David Chaplin
“While returns from the mortgage fund sector on short and longer term measures have been satisfactory with most managers providing a modest premium above cash, these returns have to be considered within the context of fees, returns available from alternative income-focused vehicles and the level of risk inherent in the fund compared to various other income based alternatives,” Fechner said in a statement.
“We question whether it is appropriate for investors to be paying this level of fees considering the amount invested in cash. It would be a timely and commendable gesture for some managers to rebate a portion of their fees back to investors.”
However, the Aviva study also reported that the mortgage fund sector in Australia is undergoing a transition with many newer entrants putting pressure on established players. “It is probably fair to say there has been a bit of a turf war between the old school traditional mortgage players and the new kids on the block who have punched above their weight in attracting inflows,” Fechner said.
“This has served to give the heavyweights a wake up call to review established processes.”
He said the competition has prompted mortgage fund managers to enhance cash returns, focus on arrears recovery and develop risk prevention policies.
“We are also comforted there does not seem to be a wide-scale compromising of conservative lending criteria by traditional mortgage funds,” Fechner said.
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