Perpetual has debuted what it claims is the country’s first mortgage trust for institutions, and has attracted $175 million to the senior-debt, first-registered mortgage fund with a target return rate of 4 per cent gross return. Despite the recent troubled history of mortgage trusts, Perpetual’s Richard Brandweiner was upbeat about this fund’s chances, and said the fund’s inflows came equally from the fixed-income and alternatives’ allocations of the investing funds. Perpetual had also launched its secured private debt fund No. 2 as a mezzanine-debt second-registered mortgage fund with a target return rate of 10 per cent which closes at the end of next month. In contrast to the older-style mortgage trusts – some of which had daily liquidity – Perpetual’s trusts would be closed-end with three- or four-year timeframes. “The closed-end nature of the fund means that investors commit to lock in their funds for the terms of the loans, meaning that there is no need for daily liquidity,” said Brandweiner, who is Perpetual’s group executive for income and multi-sector investments.
“The removal of any mismatch between the liquidity of the underlying assets and the liquidity needs of all investors is also important in avoiding the challenges that traditional mortgage funds have faced.” This closed-end structure contrasted with just-thawing mortgage trusts such as Australian Unity’s Mortgage Income Trust and Wholesale Mortgage Income Trust, and the almost-frozen Balmain Mortgage Trust (formerly Mariner). The other safeguard for investors, Brandweiner said, was that the quality of lending was critical. “No two shares are the same in the same way that no two loans are the same,” he said. “The experience of our investment team in applying our lending criteria has been an important element in avoiding poor loans.” The mortgage team is comprised of head of mortgages Marion Kraemer (at Perpetual for 21 years and with 36 years’ experience in the industry), and two portfolio managers: Melvin Seeto (eight years at Perpetual, 16 years in the industry) and Andrew Polley (16 years, and 25 years). Brandweiner said Perpetual had a 45-year history in this market in Australia, having launched one of the country’s first mortgage funds in Australia in 1966.
“This is one of the oldest managed funds in Australia still existing,” he said. Brandweiner was pleased with the response to the No. 1 firstregistered fund because it was very new to the market. “It took some time to educate the insto market as to what this is about – instos were new to direct commercial mortgage lending. “We’ve been in discussions for the past six to nine months and the offer closed at $175 million, which we see as really good interest. It’s the first time that the insto market has invested (in mortgage trusts) to our knowledge, and we had very good recommendations from asset consultants.” Perpetual went to market saying that “once we’ve lent it out we’ll be back for new raisings”, Brandweiner said. “I see this as a journey for the market as well as us. Within the first week of having money, we had $80 million of applications come in – but we don’t rush this lending process. A lot of those won’t pass our quality filters.” So, why would Perpetual be lending if banks were not? It was not to do with the quality of the loans, said Brandweiner.