Equitable investors shift into debentures

UPDATED: Investors in the Equitable Mortgage Income Trust are quietly shuffling into debentures as the group winds up its Mortgage Income Trust.

Thursday, 4 February 2010

by Paul McBeth

The trust has had a  tough couple of years and has become "uneconomic" and outside the government's retail deposit guarantee scheme.

Equitable made the decision to move towards exiting the trust in October after "substantial changes" in the market and changing regulation over the past three years, spokesman Andrew Mexted-Bragg said.

Since then, about 48% of investors have switched mainly into the debenture holding of the fund, Equitable Mortgages, with the rest being paid out.

"We realised we had to act in the best interests of all our investors and make sure they got their money back in full or got the opportunity to reinvest," Mexted-Bragg said.

The trust's funds under management shrank to $20 million by the end of September last year from $77 million in 2006 as the market conditions, legislation and the retail deposit guarantee impacted the benefit of the fund to investors over the past couple of years..

The trust has now all-but been wound up, with only three investments left in the fund worth about $85,000. The process will be completed by the end of this month.

At this time the shareholders funds in the Mortgage Income Trust will be incorporated into Equitable Mortgages. Equitable has focused on simplifying its business and ensuring it is operating investments that offer competitive returns in product structure that work for investors.

This has involved the structured closure and repayment of investors in Bastion Finance, Tasman Mortgage Fund and now the Equitable Mortgage Income Trust.

Mexted-Bragg says they now "focus on two core products" which are debentures and bonds.

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