ASB closing mortgage funds

ASB Bank is closing two of its mortgage funds to new investors, which have a combined total of $1.1 billion of assets.

Wednesday, August 10th 2005, 6:37AM

by Rob Hosking

The reason for the change is the rise in popularity of fixed mortgages, says Head of ASB Group Investments Robert De Luca. Money going into the fund was used for floating rate mortgages but demand for these had fallen over the years.

“The mortgage fund is one for the largest funds in New Zealand and it has got to the size where we decided we could only let existing clients put money into it.”

Existing investors will still be able to put into the fund, he says.

ASB will be launching a newly restructured fund, the ASB Diversified Income Trust, on August 29, he says.

The Diversified Income Trust will go through Colonial First State and a fund manager from Colonial will be in New Zealand shortly to talk to advisers.

“The underlying assets will be Colonial's global corporate debt fund – the fees will be 115 basis points compared to the mortgage fund which was 140 basis points, says de Luca.

“The expected return is around 20-22 basis points above the 90 day bill rate.

Historically the mortgage fund has produced returns, net of fees, of 10 to 20 basis points above bank bills. The restructured fund will have higher volatility but also a higher return than the mortgage funds.

Mortgage funds have seen huge rises over the past four years, with fivefold year-on-year increases in the early parts of the decade.

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Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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