Smart Investor: Earning It, July 2011

Smart Investor, Earning It, July 2011

ROADTEST

Sandhurst Select Mortgage Fund

Who runs the fund? Sandhurst Trustees, a more than 200-year-old trustee company which these days is a subsidiary of Bendigo Bank. It now offers a number of superannuation products, corporate trusts, managed funds and common funds.

The basics: Invests up to 90% of the fund into first mortgages and mortgage-backed securities. Aims to provide consistent returns, regular income and capital stability.

The process: Sandurst sets strict criteria on the mortgages it will consider, but they can be fixed or variable and are spread across residential, rural, retail and commercial properties. At least 10% of the fund is kept in liquid assets such as bank deposits.

The bottom line: It discloses results on a quarterly basis and publishes an indicative rate for the coming quarter. It then distributes earnings, minus fees or costs. The latest published indicative rate is 5.55%. If we were to put that into Morningstar’s ranking of mortgage funds over the last 12 months, it would rank 12^th out of 36 that disclose a one-year return.

Fees: The indirect cost ratio was 1.09% as of March 31. Minimum initial investment level is $5,000. Incidentally, Morningstar says this is the biggest mortgage fund it tracks in Australia.

Verdict: Steady and solid.

NEW FUND

Equiti Capital US Multifamily Property Fund

What is it?

A fund investing in US multifamily assets.

What are they?

Apartment blocks and the like – but complexes of apartments owned by one entity, and run much like a corporation with its own management team. This fund partners with Riverstone Residential Group, one of the largest apartment-focused property management groups in America.

Is that a good place to be?

The fund’s backers cite a research report saying the US apartment sector is amid a sweeping recovery and expansion cycle supported by strengthening employment growth and vacancy declines, as well as a demographic shift underpinning the multifamily theme: baby boomers and Generation Y people who are unable or unwilling to live in their own home. But they also say Australians have searched for US property opportunities on the back of the strong Australian dollar but become unstuck through lack of local knowledge.

Who runs the fund in Australia?

Equiti Capital is a specialist property investment manager and acts as the responsible entity for the fund in Australia. Its key people are Linden Toll, who used to be president of the Australian Direct Property Investment Association, and Andrew Meakin, whose CV includes roles at the Commonwealth Bank of Australia.

What are the costs?

There’s a management fee of 1.23%, plus a performance fee of 20.5% of the fund’s performance over a hurdle of 10% per year. Then there’s an acquisition fee of up to 3.08% of the cost of any new property the fund acquires, and a disposal fee of up to 1.03% when it sells again. It’s open to anyone with an initial investment of $10,000 or more.

GIZMO

BlackBerry Torch

If an old-style BlackBerry met up with an iPhone and reproduced, this is what you’d end up with. With this gizmo, the BlackBerry turns touchscreen. But – and I like this – it hasn’t abandoned the traditional keyboard, which now slides out from beneath the screen.

It’s a swish piece of technology, with more effort than usual made on the non-email elements of the device: the camera is better than in previous incarnations, for example, and there is a dedicated Apps manager, though in terms of available variety it clearly doesn’t hold a candle to any Apple product. The browser is more functional than in previous versions and the screen, with iPhone-style automatic shifts from landscape to portrait, is appealing. But for me, that’s all just bells and whistles: I want my BlackBerry to be the most efficient method for managing emails on the road, and it still is.

FUND WATCH

Since Asia is the region that’s supposed to be the engine of the world economy, it’s something of a surprise to lean that over the last three years ex-Japan Asian stocks have actually gone backwards, and over five years have produced just 2.7% per year. Naturally, there’s been a global financial crisis in the middle of that, but it still goes to show that just piling money into Asia isn’t enough without shrewd management.

The Aberdeen Asian Opportunities fund has consistently beaten the benchmark by at least two percentage points each year, more than covering the fees. It has done so with a troubling dominance of financial services – almost 40% of the fund – although the big holdings are perhaps not the ones one might expect. Instead of a Chinese heavyweight like ICBC, the top holding is Singapore’s OCBC, one of several Singaporean companies (ST Engineering and Singapore Telecommunications) among the top positions. The biggest China stock is Petrochina, with China Mobile also within the top 10.