SBS brings out Lifestages funds
One of New Zealand’s fastest growing financial services organisations, SBS (Southland Building Society), has recently launched a range of unit trusts called Lifestages.
Monday, August 19th 2002, 7:22AM
One of New Zealand’s fastest growing financial services organisations, SBS (Southland Building Society), has recently launched a range of unit trusts called Lifestages.
Lifestages is a range of unit trusts, which covers the full spectrum of portfolio options including the Lifestages Mortgage Portfolio.
SBS is not only New Zealand’s largest building society (SBS had assets of more than $1.2billion at March 31.) but has been one of New Zealand’s fastest growing, main stream, financial services organisations with its balance sheet tripling in size over the past 10 years.
Lifestages has been launched by SBS subsidiary Funds Administration New Zealand Limited (FANZ) and is designed to provide a solution to whatever stage of life an investor is at. FANZ managing director Graham Duston believes that Lifestages multi-manager, multi-style approach would provide a "no surprises" approach for investors and financial planners, which was consistent with the quality approach to business that SBS undertook.
With the diversified portfolios accessing some of the world’s leading investment managers and the Lifestages Mortgage Portfolio managed by SBS, who has 133 years of mortgage management experience across the residential, rural and commercial sectors, Duston believes that Lifestages will provide planners with some powerful options in portfolio construction.
Duston says some of the key issues around mortgage fund portfolio construction are:
1.Credit Management and experience: SBS had an outstanding track record in this area with more than 133 years of lending experience and a mortgage book under management of over $1 billion.
The underlying credit quality of the underlying mortgages of the Lifestages mortgage portfolio is also a major feature of the portfolio.
The 2002 KPMG Financial Institutions Performance Survey of financial institutions showed that, in terms of credit quality measures, SBS operates one of the highest-grade mortgage books in New Zealand.
|
Organisation |
Provision for Doubtful Debts/Loans and Advances % |
General Provision/Net Loans and Advances |
Impaired Asset Expenses/Average Loans and Advances |
|
ASB |
0.41 |
0.36 |
0.09 |
|
BNZ |
0.68 |
0.78 |
0.26 |
|
National Bank |
0.23 |
0.00 |
0.05 |
|
SBS |
0.13 |
0.00 |
0.00 |
|
Westpac (NZ Division) |
0.41 |
0.29 |
0.13 |
Source: KPMG Financial Institutions Performance Survey 2002 (as at December 31, 2002).
2. Ability to Write Mortgages: This area was perhaps one of the most crucial and least understood. Most financial services institutions today held a mortgage for between 5 and 7 years.
By definition a mortgage portfolio holding $100 in mortgages at the start of the year could expect to hold around $80 by year-end as principal repayments were made and loans refinanced.
The key issue for most mortgage trust providers was the ability to continually write new mortgages so as to ensure the portfolio was always fully invested.
Duston stressed that this was a key issue, particularly with strong flows expected into the mortgage trust sectors in the current environment.
Failure to generate new loans meant the new funds would be invested in cash thus dragging down the returns to investors.
SBS had made a commitment to fund the Lifestages Mortgage Portfolio by up to $100 million should funding come in and was always able to generate new loans.
3.Liquidity management: The ability to pass loans back to the SBS should the fund have liquidity issues was a major advantage and would position the Lifestages Mortgage Portfolio as one of the highest grade but flexible products in the market today.
The Lifestages Mortgage Portfolio will provide access to residential, rural and commercial first mortgages with no lock in or exit fees.
A monthly capital draw down facility, payable on the 15th of each month so investors could pay their bills on the 20th was also a feature of the Lifestages Mortgage Portfolio.
Duston also believed that risk management in the fixed interest portions of portfolios was a key consideration moving forward. The temptation to "dial up" returns (and risk) was felt at times such as this when international equity markets had not performed over the past 18 months.
Financial planners could ill afford defaults in the fixed interest and mortgage part of their client’s portfolios in the current environment so a measured approach to risk in fixed interest in portfolios would be important. This approach was a feature of all the Lifestages Portfolios.
Advertorial - For more information contact SBS on 0800-650835
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