Regional mortgage managers upbeat despite CMT suspension

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Cash-strapped investors looking to offset losses from failed finance companies could have been a factor in the "unprecedented level" of redemptions that forced Canterbury Mortgage Trust (CMT) into suspending withdrawals yesterday, according to one of the group's directors, Don McBeath.

Wednesday, July 23rd 2008, 11:02AM

by David Chaplin

McBeath said much of CMT's recent growth was fueled by financial advisers outside the firm's traditional stomping ground in Canterbury, many of whose clients might have been caught out by the debenture debacle.

"Those investors will probably be wanting some cash," he said.

According to McBeath, the CMT - which is controlled by Fund Managers Canterbury - was hit harder by the run on redemptions than other similar associated firms such as Fund Managers Otago and Fund Managers Auckland.

"It's partly because we are bigger," he said.

The CMT has shrunk to $250 million after hitting a high water mark of almost $320 million in the middle of last year.

Peter Hutchinson, managing director of Fund Managers Holdings (which has a shareholding in six regional mortgage fund managers including Canterbury), applauded the move by the CMT saying it was "a very appropriate action".

"It's a normal mechanism to protect the rights and capital of all investors," he said. "[CMT] recognised the problem early - I'm sure it was a difficult decision but it was a responsible one."

Hutchinson, who also manages the Dunedin-based NZ Mortgage Income Trust (which is part-owned Fund Managers Holdings), said the CMT suspension appeared to be a liquidity issue unique to Canterbury.

He said while inflows into the Otago fund have slowed it is still operating as normal and returning dividends to investors.

In its latest financial statements for the 13 months to the end of March this year NZ Mortgage Income Trust revealed that tough external conditions had "caused the inflow of funds to slow restricting the fund's lending activities and leakage in terms of funds under management".

"NZ Mortgage Income Trust has not had to use any of the liquidity management measures available to it under its trust deed during this period."

Bruce Rasmussen, general manager of Fund Managers Auckland, said its product - the Auckland Mortgage Trust - was holding up well.

"Actually it was worse last year - we're getting more money coming in now," Rasmussen said.

McBeath said Fund Managers Canterbury would manage its loan book tightly to rebuild liquidity in the portfolio.

He said the group would also explore other capital-raising options in the wholesale market.

CMT withdrawals have been suspended until March next year. According to the Fund Managers Holdings website, as well part-owning the Otago, Canterbury and Auckland mortgage trusts, the group also has a share of First Mortgage Trust, Midlands Mortgage Trust and Capital Mortgage Income Trust.

"Each of these funds has grown substantially in the ten years since the first fund was opened in Otago and collectively the funds now stand at over $800 million," the site says.

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