La Trobe Financial Head of Distribution, Michael Watson talks about the company’s long history in property lending and how its credit funds deliver investors capital-stable investments with low volatility and attractive monthly income.
Jessica Amir: Hello, I’m Jessica Amir for the Finance News Network. With me today from the La Trobe Financial is Head of Distribution Michael Watson. Michael, thank you so much for your time.
Michael Watson: Good morning Jessica.
Jessica Amir: So first up, for those who haven’t heard of La Trobe Financial, just give us a quick introduction.
Michael Watson: La Trobe Financial was founded in 1952, so it’s 67 years of continual and focused operations within the property credit asset class. We presently have $7,200,000,000 of funds under management, all deployed across diversified portfolios of mortgage secured loans. In 2017 La Trobe Financials, 80 per cent acquired by the world’s largest alternative asset manager, The Blackstone Group. We presently have 330 staff across Melbourne, Sydney, Shanghai, and Hong Kong.
Jessica Amir: Let’s pause on the residential property market which is in a downward trend. How do you protect investors against losses in the fund?
Michael Watson: The key to protecting investors capital in any fund is having quality assets, a quality structure, and quality management. Now, at La Trobe we’ve managed investor mandates since 1952 totalling $16 billion dollars cumulatively across institutional debt capital markets and we have pool retail investors. And of those $16 billion dollars we have not returned a cent of loss of any capital to any investor. So we got a really strong track record there.
Drilling down onto the assets itself. In our fund, the highest we lend to is 75 per cent of a property’s value and across our portfolio we have a portfolio average more in the line of 62 to 63 per cent. So we always maintain strong capital protection for our investors and that shows across our results going over many economic cycles, business cycles and property cycles.
Jessica Amir: Thanks Michael. Now to your fund, your credit fund, in little more detail can you tell us about the underlying assets?
Michael Watson: Absolutely. The assets in our portfolios are loans to borrowers secured by first ranking mortgages here in Australia. We source our assets, so we have a team on the ground who are BDM’s around Australia working with the mortgage broker network to find quality assets that we then approve and manage internally to invest across our portfolios. Of our portfolios, we have the highest rated mortgage fund in Australia, the 12 month term account, which has ratings from Zenith and Lonsec of recommended and SQM research, we’ve given us four and a quarter stars.
Really strong portfolios there and they’re very granular assets. We’re talking home loans, small commercial loans, with an average size in the portfolio of about $532,000.
Jessica Amir: And how do you manage the fund?
Michael Watson: The fund is established around providing income to investors and all importantly capital stability. So we manage our loan portfolios to generate stable, reliable monthly income for our investors across all business cycles.
Jessica Amir: And Michael tell us about the performance.
Michael Watson: The Australian credit fund has an inception date of 1 October, 2002 and since then has operated with flawless liquidity across all of its products. It’s products include the classic 48 hour account, which as you can imagine has two business day access or two business day liquidity, a 12 month term account, which is as it sounds as well at 12 month term investment with ongoing monthly income distributions, currently returning a variable rate of 5.2 per cent per annum. It’s never missed a redemption nor has it missed a distribution throughout all of its history.
Our peer to peer account, our select investment offering is Australia’s largest and most robust peer to peer option, allowing investors to choose the individual loans in which they want to invest into. And finally, we have our high yield investment account, which is for more sophisticated investors who are looking to invest for a longer timeframe with a four year investment term, presently returning 7 per cent per annum with variable interest and monthly distributions.
Jessica Amir: Turning to the outlook Michael, what are some of the major factors that you’re seeing at play?
Michael Watson: Ours is a very interesting asset class and right now there’s a lot of factors at play. Over the last 10 years we’ve seen a lot of changes to the property credit market in Australia, when the end result of that is more contestable assets for non-bank lenders like La Trobe Financial. In turn, that leads opportunities for fund managers to create diversified portfolios of income generating stable assets for investors.
Jessica Amir: And just lastly Michael, before we let you go, is there anything else that you wanted to add today?
Michael Watson: Investors really need income and stability in their fixed income portfolios. Our products have this as their cornerstone, all four in fact, our classic 48 hour account, our 12 month term account, our select investment account and our high yield investment account. La Trobe Financial dates back to 1952 as I mentioned, and has the backing of the world’s largest alternative asset manager. Investors can invest online or direct and if they have any queries along the way, they can feel free to contact any one of our friendly team.
Jessica Amir: Lovely. Michael Watson from the La Trobe Financial. Thanks for the introduction.
Michael Watson: Thank you very much Jessica.