Independent fund ratings agency, SQM Research, has released its annual review of the Australian Mortgage Trust Sector.
Non-bank La Trobe Financial came out on top with two of the highest rated Funds. Its 12 Month Term investment offering received 4.25 stars (Superior) and its peer-to-peer Select Investment Account came second with 4.0 stars (Superior).
In assigning ratings, SQM Research takes into account a number of key operational and risk return factors, including management, corporate governance, process, fees and returns.
SQM Research singled out a number of key strengths in La Trobe Financial’s Fund operations for investors, including its strong distribution network and market niche and diversification across geographical sectors and borrowers.
Chris Andrews, La Trobe Financial’s Chief Investment Officer, welcomed the findings.
He said: “We are particularly pleased that our $400m peer-to-peer offerings have been recognised as Australia’s largest and longest-operating peer to peer platform. This form of investment continues to attract interest from investors and advisers and we have developed enormous conviction in its merits over our two decades in the peer-to-peer space.”
Caterina Nesci, Executive General Manager Head of Marketing at La Trobe Financial, said: “This rating comes at a particularly important time for investors with higher interest rates and increased share market volatility likely to be experienced across the global economy. Investors are becoming increasingly focused on generating better risk adjusted returns, diversifying their portfolios and obtaining access to stronger related credit exposures.”
Managing Director of SQM Research, Louis Christopher, said: “Australia’s mortgage trust sector has experienced rapid growth over the past 12 months. From our observations, funds under management has nearly doubled.
“In our view, arrears in the sector have remained very low, keeping overall default risk at bay. However risks may increase as tightening of lending criteria affects refinancing of existing loans.
Additionally, the rapid increase in funds under management creates a counter risk of a rapid withdrawal event should managers not prudently safeguard these inflows.
“While the lending book of mortgage trusts are dominated by Interest Only loans, the strict lending criteria applied by mortgage trusts reduces refinancing risk. Loan-to-valuation ratios are considerably lower compared to the broad market and the scrutiny applied on the borrower is also significantly higher.”
The SQM rating announcement comes on the back of La Trobe Financial’s recent success at the International Alternative Investment Review Awards (IAIR) in Hong Kong, where La Trobe Financial was judged the “Best Investment Company in the Asia Pacific.”