| First mortgage trusts invest in mortgages over | | | | to investors who wish to redeem, usually with |
| residential or commercial properties, as well as liquid | | | | anywhere from 24 hours to 60 days notice. |
| investments such as cash and bonds. This provides an | | | | Mortgage trusts offer regular income and ready |
| added advantage for the investors to redeem funds | | | | access to requested funds. Income from mortgage |
| at short notice. For this reason, they serve as a simple | | | | trusts is paid monthly or quarterly, depending on the |
| and popular alternative to cash management trusts | | | | manager. It may be paid by cheque, reinvested, or can |
| and fixed term deposits. In response to the problems | | | | also be directed to a nominated bank account. They |
| of well-publicised failures of mortgage trusts, all | | | | provide investors with regular returns, security, and low |
| mortgage trusts have been brought into line with the | | | | volatility. At between five and seven percent, their |
| requirements introduced by the Managed Investments | | | | current return is compared favourably with fixed term |
| Act from July 2000. | | | | deposits and cash management accounts. This can be |
| This means that investors would be able to deal with | | | | advantageous in an environment where official interest |
| sound financial institutions when investing in mortgage | | | | rates are dropping, yet a disadvantage when interest |
| trusts. Mortgage trusts are popular investments for | | | | rates rise. A more conservative investor would like to |
| investors who have a 12-month or longer investment | | | | invest in a mortgage trust with a good exposure to |
| horizon and are looking for a yield that compares | | | | variable rate loans, which will typically move in line with |
| favorably with cash management trusts or fixed term | | | | interest rate changes. |
| deposits. Some of the famous mortgage trust | | | | To invest in mortgage trusts, one will need to obtain a |
| managers are ANZ Managed Investments and ING. | | | | prospectus. Mortgage trusts generally have no entry |
| Cash levels in these trusts are usually between 10 and | | | | and exit fees, while annual fees is typically in the range |
| 30 percent of the assets. Managers can provide cash | | | | of one to two percent of funds invested. |