Over the past 12 months, the La Trobe Financial group has originated A$13 billion (US$8.8 billion) in high quality mortgages, taking assets under management to A$14 billion. Meanwhile, the group’s credit quality, asset profile and arrears have all improved, leaving the business in excellent shape.

As the impacts of the pandemic fade, we have shifted attention to dealing with a rising rate environment. But we are confident Australian consumers and our loan portfolio will remain resilient.

This confidence stems from our detailed up-front credit work, conservative underwriting policies – we do not lend above an 80 per cent LVR [loan-to-value ratio] – and serviceability buffers. It is also underpinned by record low unemployment, substantially increased household savings and high levels of built-up housing equity.

La Trobe Financial is one of Australia’s most diversified asset managers and mortgage originators. We are unique in that more than half the group’s funding comes via our A$7.6 billion credit fund, which serves 80,000 investors.

When Brookfield acquired the business, in May 2022, it was impressed with the reach of our asset management operation and the breadth of our mortgage product suite. We believe there is a tremendous opportunity to further diversify our funding by reaching new RMBS [residential mortgage-backed securities] investors that are yet to invest in our bonds but may be familiar with the Brookfield name, and by strengthening existing relationships.

We have experienced strong, consistent growth in mortgage originations while remaining diligent and continuing to target high-quality borrowers. We expect this growth will see the group settling more than A$8 billion of loans this financial year.

Historically, our capital market funding model has been twice-annual issuance. This has served our company well. Based on our growth trajectory, we would like to have the option to issue into capital markets three or more times per year, subject to market conditions. Strategically, we believe it is important to issue throughout the economic cycle. To do this we will continue to partner with existing and new long-term investors.

Market conditions are choppy in all asset classes but we are seeing signs of stability, evidenced by demand for our paper. RMBS spreads are wider than historical norms, but as central banks reach terminal interest rates we expect a tightening bias to emerge for high-quality issuers such as La Trobe Financial.

The volatility in 2022 has affected global markets and individuals in many ways, from higher inflation and rising interest rates to concerns about geopolitical tensions. Throughout these volatile times, the credit fund has performed exceptionally well – largely due to our prudent lending practices, conservative maximum LVR and investment management expertise.

These factors, despite the global uncertainty, have allowed us to continue to increase the returns we can offer our investors across the credit fund’s seven investment products.

Founded on the principle of “others before self”, La Trobe Financial incorporates ESG principles into all facets of our business, from our commitment to reducing our impact on climate change by going carbon-neutral in 2021 to providing borrowers who have been excluded from mainstream lenders with access to a mortgage.

We aim to establish an ESG mandate within our credit fund to allow our retail investors to invest in ESG-linked mortgages and are working toward enabling our RMBS investors to invest in bonds backed by ESG-linked mortgages. Watch this space.

Despite well-publicised challenges, namely rising interest rates and inflation, La Trobe Financial’s loan portfolio and outlook remain positive. We are comforted by record low unemployment and our borrowers’ financial positions and buffers. We are closely watching the housing cycle but are buoyed by our portfolio LVR, funding diversity, large bank panel and growing RMBS portfolio.

La Trobe Financial will, as ever, continue to work closely with investors and meet the market with consistent and regular RMBS issuance.