We upgraded two funds, the Latrobe Australian Mortgage Fund-Pooled Mortgage Option to four stars and the Australian Unity Mortgage Income Trust to three stars. We removed from ‘On Hold’ and assigned a three-star rating to the Challenger Howard Mortgage fund.

We only rate one fund as two stars, the OnePath OA IP-OnePath Mortgage Tr No. 2 fund, which OnePath Funds Management has decided to compulsorily return capital to investors over the next three to five years.
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S&P Fund Services analyst Peter Ward said: “We have not seen a uniform approach among mortgage fund managers or consistent timing in resolving liquidity issues. We consider this to be a reflection of the different underlying investor base, underlying investments, and different managers’ mortgage fund sector outlook.”
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“Three funds, managed by Australian Unity, Challenger, and OnePath have changed their redemption mechanisms. Each solution has provided improved certainty, but outcomes differ. The changes have contributed to our decisions to upgrade the Australian Unity fund to three stars from two stars and to resolve the long-standing ‘On Hold’ ratings on the Challenger and OnePath funds,” added Mr. Ward.
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Key areas of focus during this review included fund managers’ product strategies, investment team continuity, liquidity and redemption provisions, lending competition and margins, portfolio credit quality/arrears and defaults, and fees.

Click for a full list of funds rated in the S & P Australian Fixed Interest – Mortgages Peer Groups

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