The EQT Wholesale Mortgage Income Fund provides investors with exposure to a portfolio of real estate mortgage securities operated by a highly conservative manager.
The Fund is managed by ASX listed Equity Trusties Limited (ASX:EQT) who has in excess of $20 billion dollars in funds under management.
EQT’s process seeks to derive stable returns with predictable quarterly income derived from a diversified pool of real estate mortgages, aiming to outperform the RBA Cash rate on a rolling three-year basis.
Zenith’s View
Zenith sees the Fund as representing a good choice for conservative investors seeking a stable quarterly income stream.
The Fund operates under a highly conservative lending regime, which is somewhat contradicted by the broadly competitive rates at which it lends, which would normally be associated with higher risk lending. EQT’s loan pricing power is based on clients paying a premium for the level of service and relationship management imparted by EQT.
The Fund managed to avoid the issues which have plagued the sector since 2008, liquidity issues and declining credit quality. This is attributed partly to their traditional investor base which has been mainly sourced from existing EQT clients minimising exposure to ‘hot money’ flows seen in the wider marketplace.
The Fund’s performance over the long term has been solid and consistently a first quartile performer in its peer group. While there have been periods where the Fund has lagged in environments where interest rates move upward quickly, this is generally an inherent characteristic of mortgage funds with a weighting to fixed rate mortgages. Given EQT sees itself as a fundamental long-term investor who seeks to look through interest rate cycles, Zenith sees this outcome as an inherent part of the Fund’s makeup and a function of its strategy.
Overall, Zenith regards the Fund as an attractive offering for the conservative investor.