Consistent returns through uncertain times
In an era of economic volatility and market uncertainty, investment opportunities that provide consistent returns can be hard to come by.
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In an era of economic volatility and market uncertainty, investment opportunities that provide consistent returns can be hard to come by. Local company First Mortgage Trust (FMT) shares strategies that have managed to achieve this for more than 27 years.
With their conservative investment strategy and stringent lending requirements, FMT has not only weathered the storms but has also managed to consecutively increase its investment return rate over the past five quarters and is anticipating further increases.
“In our 27 years no FMT investor has ever lost a cent of capital, even during the GFC and, more recently, the Covid-19 pandemic,” says CEO Paul Bendall.
This accomplishment is a testament to FMT’s disciplined approach, their risk management strategy, the expertise of their team, their local property market knowledge and their commitment to the preservation of investor capital.
“We know these are uncertain times and people are cautious, especially when it comes to investing and deciding what to do with their nest egg and savings,” says Paul. “Living costs and inflation are high and this can be hard for savers. We understand this and that’s why we are pleased to have been able to deliver increased investment returns for the last five quarters, and because of our consistent investment returns and the peace of mind we provide we’ve seen many of our investors invest more with us and recommend us to their friends and family.”
How FMT works
Investors invest in either the First Mortgage Trust Group Investment
Fund or the First Mortgage PIE Trust, then FMT lends the money out to Kiwis seeking property finance. FMT differs from some other investments as both funds are trusts. The trust structure means each fund is supervised by an independent supervisor. The supervisor plays an integral role in the governance of FMT and they have oversight of lending decisions.
“This gives our investors confidence that their money is being managed
well,“ says Paul. “The money our clients invest with us helps New Zealanders achieve their property related goals. It builds homes, businesses and it helps shape communities. In return we are able to provide a stable return to our investors to help them achieve their investment goals.”
Increased investment return rate
FMT has showcased its expertise in wealth protection and generation by progressively increasing its investment return rate. Their March 2023 quarterly rate was a pre-tax return rate of 6.61 percent (annualised), which was well received by investors.
Past performance is not a reliable indicator of future performance.
First Mortgage Managers Limited, the manager of the First Mortgage Trust Group Investment Fund and the First Mortgage PIE Trust, is licensed under the Financial Markets Conduct Act 2013 as a manager of registered schemes and is not a registered bank under the Banking (Prudential Supervision) Act 1989. Professional investment advice should be taken before making an investment.
Product Disclosure Statements are available at fmt.co.nz
The big squeeze
Are rising interest rates and low capitalisation rates making you nervous? Owen Cooney from OC Consulting advises investors on how to withstand “yield squeeze”.
Are rising interest rates and low capitalisation rates making you nervous?
Owen Cooney from OC Consulting advises investors on how to withstand “yield squeeze”.
Photo Jahl Marshall
Commercial property has been a passion of mine for decades, but the economic environment we are all accustomed to operating in is changing.
For as long as I can remember, there has been a differential between the interest rate paid on mortgage debt and the yield (or capitalisation rate) received from a property. However, with interest rates now rising, the cost of debt will soon be similar to, if not greater, than the capitalisation rates a commercial property can reasonably generate.
In recent years it has been common to use debt to increase yield to an investor because that debt was so cheap. But thanks to inflationary pressures and rising interest rates, investor yields are being squeezed – and will continue to be squeezed until the market adjusts.
These comments are, of course, a generalisation. There are always markets where some purchasers will happily accept a very low capitalisation rate for a particular property. It’s also worth pointing out that investors who don’t need to take on debt to purchase a commercial property will not feel that same squeeze!
But the investor collectives we help set up at OC Consultancy Ltd do use non-recourse debt and will continue to do so. Instead of leveraging a property at 45 percent to 50 percent of LVR, we now intend to leverage at around 30 percent to ensure the smoothest path forward as New Zealand’s Reserve Bank battles to bring inflation back under control.
In our post-pandemic climate, there’s no escaping yield squeeze for the foreseeable future. But our message to investors is this – yields are only one factor that should be considered when making an investment decision.
You may be familiar with the advice of Warren Buffett regarding investment as a long-term game. Buffett famously said, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” Unfortunately, in our recent bull market, this message has been forgotten by many.
In the commercial property context, our focus is on securing long-term leases with good quality tenants and covenants. This, coupled with robust rent review mechanisms, is the best way to protect your investment from the effects of inflation and yield squeeze.
To be a successful property investor, you must look beyond what’s happening right now and see what is most likely to occur in the future.
We are confident that good commercial property will stand the test of time and be resilient. Just like any other investment, you must be prepared to weather the ups and downs of each economic cycle and keep your eyes firmly on the horizon of what’s to come.
The right building, with the right tenant and the right lease arrangements in place, will always be profitable in the long run.
Helping kiwis supercharge their wealth
Ask Kristen Lunman when you should start investing, and she’ll tell you, today. Thanks to Hatch, the digital investing platform she co-founded, the world’s share markets are now more accessible to Kiwis than ever.
Ask Kristen Lunman when you should start investing, and she’ll tell you, today. Thanks to Hatch, the digital investing platform she co-founded, the world’s share markets are now more accessible to Kiwis than ever.
What does wealth mean to Kiwis? Lunman says that for her customers, it means having a full life that balances travel, work, family, friends, and health. Lunman saw limited options for ambitious Kiwis to grow their wealth and, as a woman balancing career, children and life, she felt the pain. It motivated her to start Hatch, which delivers a straightforward way for people like her to get their money working as hard as they do to earn it in the first place.
“We launched Hatch on a mission to help Kiwis supercharge their wealth and build good money habits,” says Lunman. “Term deposits and savings are no longer attractive options to grow wealth thanks to low interest rates and inflation.” With Hatch, Kiwis can now own shares in over 3500 US-listed companies and funds on the intuitive and straightforward platform.
“Property’s great, but you need a large amount of capital to get involved, and then you’re locked in. Building a business is another way to grow wealth but making a success of it is hard work and high risk, and again, once you’re in, you’re in.”
Owning shares in world-class companies and funds has always been an opportunity reserved for the financial elite, something that never sat right with Lunman. She saw a way to offer a fresh new approach to self-directed investing that’s designed for newbies to experts.
“We’ve built a simple, straightforward experience to help you take control, wherever you’re at. With Hatch, it’s not hard to back the pioneers that are shaping our future and benefiting from their success. From Netflix to Zoom, Tesla and Vanguard, when you approach investing like you’re backing a business or industry, it breaks down the mental barriers to getting started.”
It takes about three minutes to open a Hatch account. After transferring money into your account, the next morning, you’re ready to buy shares in companies and funds in the world’s largest and most liquid share market. It’s that simple.
“We want people to be shareholders in businesses because it’s a tried and tested way to meet financial goals over the long term. We’re not about trading stocks on a whim and trying to predict fluctuations in the markets. We want to help Kiwis build sustainable wealth over time, through great financial habits.”
For Lunman, the best investors are mindful investors. This means considering why you’re investing in the first place. This level of self-awareness helps you stay calm and make smarter choices. “Being mindful means you don’t panic when your shares fall in value. There are always going to be ups and downs in share prices, but over time, the highs in the markets should outweigh the lows.”
As part of Kiwi Group Holdings alongside Kiwibank and Kiwi Wealth, Hatch has grown and benefited from the backing and wisdom of one of New Zealand’s most trusted financial names whilst staying completely autonomous. And the Kiwi family has benefitted from a fresh, innovative new brand. Win-win.
Buying a slice of a company or a pioneering industry like fake meat or cannabis and watching it grow and shape our future is exciting. Shareholders in the likes of Apple, Tesla, Beyond Meat and clean energy companies are looking ahead and hoping to benefit from megatrends that are changing the way we live. Why not join 65,000 other Kiwis and to do the same?