A mortgage trust is a form of investment that pools money for lending to borrowers as mortgages over property. This may be property that already exists, or money may be lent to a borrower undertaking property development. In return for investing money, investors receive a regular income called a “distribution” from the interest paid by borrowers and cash held by the Trust. Distributions may be paid half yearly, quarterly or monthly depending on the trust.
Pooled and contributory mortgage funds
There are two main types of mortgage trusts, which are summarised in the table below.
Mortgage trusts can be unlisted or listed. Unlisted trusts are not on a public market such as the Australian Securities Exchange (ASX). Unlisted trusts are not subject to supervision from a market supervisor like a listed trust. However retail mortgage trusts, being trusts with a Product Disclosure Statement (PDS), are regulated by the Corporations Act, of which the Australian Securities and Investment Commission (ASIC) is the regulator.
Potential benefits of investing in a mortgage trust
In return for investing in the trust, investors receive regular income distributions for as long as they remain an investor. Mortgage trusts also offer exposure to asset classes and returns that would not ordinarily be available to retail investors.
ASIC has developed benchmarks and disclosure principles to assist investors to evaluate the risks associated with an investment in a retail mortgage trust. The fund manager must address the benchmarks and disclose against the principles in the PDS and update them regularly for publication on their website.
Like most investments, there is risk associated with the potential reward and it is critical to ensure the investment risk profile suits your personal circumstances. A licensed adviser can help you make this judgement if you are unfamiliar with this investment type.
Please note that Trilogy Funds provides general information only and does not take into account any of your personal circumstances or seek to provide a personal recommendation to you. You are encouraged to seek expert advice before acting on any information contained in our resources.
IMPORTANT: This article is issued by Trilogy Funds Management (AFSL 261425) and provides general information only. It does not provide financial product advice nor is it an offer of securities. If you require personal advice on the suitability or other aspect of an investment, consult a licensed adviser, who will conduct an analysis based on your circumstances. Past performance is not a reliable indicator of future performance. Investments in the Trilogy Monthly Income Trust are not bank deposits and are not Government Guaranteed.