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SQM Research
Ratings Update February 2016
SQM Research today released five reviews - four Mortgage Funds and one RMBS Fund.
The Australian Unity Select Mortgage Income Fund (the Fund) is a managed investment scheme aimed at investors seeking direct exposure to residential property development and commercial mortgage loans. By initially investing into the Fund’s Cash Account, investors have the option to select the mortgages they wish to hold or provide the Manager authority to select which mortgages to fund. The Fund is structured so that individual mortgages are packaged into a Syndicate Fund – separate from other Syndicate Funds and investors can invest in more than one Syndicate Fund. Investors are under no obligation to invest in any underlying Syndicate Fund and can withdraw from their Cash Account at any time. However, once funds are converted into a Syndicate Fund, which relates to a specific mortgage, investors are required to hold their investments for the full investment term.
The Fund has received a 3¾ (3.75)-star rating.
The Balmain Discrete Mortgage Income Trusts (Trust) is a managed investment scheme aimed at investors seeking direct exposure to individual commercial mortgage loans. By initially investing into the Trust’s Cash Units, investors will be able to select personally the mortgages they wish to hold. The Trust is structured so that individual mortgages are packaged into a Sub-Trust – a series of discrete mortgage income trusts that each hold no more than one first mortgage loan. Investors are under no obligation to invest in any underlying Sub-Trust and can withdraw from their Cash Units at any time. However, once Cash Units are converted into a new class of units which relates to a specific loan (Loan Units), investors will be required to hold their Loan Units for the full investment term (i.e. until the loan is repaid).
The Trust has received a 3¾ (3.75)-star rating.
The EQT Wholesale Mortgage Income Fund (the Fund) is an unlisted registered managed investment scheme. The Fund invests primarily in a diversified portfolio of registered first mortgages of selected improved retail, commercial, industrial and residential real estate within Australia. Loans are for a maximum term of five years, and the maximum loan to value ratio of 66.67% is applied to initial funding and any renewal.The investment objective is to outperform the RBA cash rate over a three-year rolling period, and the suggested investment timeframe is three years. The Fund is conservatively managed and has not recorded any losses since inception.
The Trust has received a 4.00-star rating.
The AIMS Commercial Mortgage Fund (the Fund) is a registered managed investment scheme structured as an open-ended unlisted unit trust. The Fund invests primarily in a diversified portfolio of commercial registered first mortgages. Any remaining funds are held in cash or short-term, investment-grade interest-bearing securities.
The Fund has received a 3¾ (3.75)-star rating.
Firstmac High Livez (the Fund) is a registered managed investment scheme structured as an open-ended unit trust. The Fund aims to provide investors with exposure to underlying residential mortgages by investing in Asset-Backed Securities and Short Term Money Market Securities. Exposure to Asset-Backed Securities will comprise of medium term Australian dollar denominated Residential Mortgage-Backed Securities (RMBS), while the Fund’s Money Market Securities exposure will include Term Deposits and Bank Notes.
The Fund’s investment objective is to provide investors with stable monthly income returns that exceed the Reserve Bank of Australia’s Cash Rate by over 2.5% on an annual basis. The suggested investment timeframe is three to five years.
The Fund has received a 4.00-star rating.
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About SQM Research
SQM Research Pty Ltd is an independent investment ratings and forecasting research house covering all asset classes. SQM Research also supplies residential property data and property related reports and guidance to financial institutions, property developers and real estate investors.
For more information please visit www.sqmresearch.com.au
Research Methodology
In general, the assessment approach adopted by SQM Research incorporates a combination of qualitative and quantitative research techniques to assess property investment products.
Information generated is passed through the SQM Research assessment model at the completion of the assessment process. The assessment model generates a product score, which correlates to a specific star rating (out of a maximum of five stars). Each star rating covers a scoring range, allowing products to be ranked within quarter star increments.
Following are descriptions for each of the star ratings, which have been developed as a guide for dealer group research teams and investment committees:
4.5 stars and above – Outstanding. Highly suitable for inclusion on APLs.
4 stars to 4.25 stars – Superior. Suitable for inclusion on most APLs.
3.75 stars – Favourable. Consider for APL inclusion.
3.5 stars – Acceptable. Consider for APL inclusion, subject to advice restrictions.
3.25 stars – Caution required. Not suitable for most APLs.
3 stars – Strong caution required. Not suitable for most APLs.
Below 3 stars – Avoid or redeem. Unapproved.
Hold – The rating is currently suspended until SQM Research receives further information. A rating is typically put on hold for a period of 2 days to 4 weeks.
Withdrawn – The rating is no longer applicable.
Significant issues have arisen, and investors should avoid or redeem units in the fund.
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