Rismark has launched a suite of path-breaking managed funds to invest in residential real estate assets across Australia.
Rismark’s funds invest in hybrid housing finance instruments developed by Rismark, called Equity Finance Mortgages® (“EFMs”).
Rismark’s investment portfolios offer attractive risk-adjusted returns and outperformed virtually all other asset-classes throughout the global financial crisis.
The EFM® has received wide acclaim and multiple industry awards.
In a bi-partisan show of support, both the Federal Government and the Liberal Party have expressed considerable interest in the development of the EFM. In fact, the Australian Labor Party’s New Directions for Affordable Housing paper specifically references Rismark’s EFMs as a solution to Australia’s current housing affordability crisis.
At private seminar hosted by Rismark in July 2008 for super funds, sovereign wealth funds and asset consultants, Sharan Burrow, the President of the Australian Council of Trade Unions (ACTU), commented:
“Shared equity innovations are a complementary part of the affordability solution and it is across the middle and higher ranges of the income distribution where they will take root and grow. I have been vocal in expressing my support – and that of the ACTU – for shared equity schemes, for several years.
Australia has been at the forefront of research and new product development in this arena. For example, the first mass market, private sector shared equity product was recently introduced by Rismark International in conjunction with Bendigo and Adelaide Bank in March 2007.
Residential property is the largest single asset class in Australia, valued around $3.2 trillion. But for super funds it has been hard to access, because of the high round-trip transaction costs and ongoing maintenance costs associated with buying residential property direct, and because of fragmentation of the rental market.
Shared equity promises to provide investors with cost-effective access to the otherwise ‘untouchable’ owner-occupied housing market, which accounts for around 70% of the total residential stock in Australia. With home-owners managing their own properties, a close alignment of interests should be assured.
By allocating a share of their investments to residential property – to a portfolio of shared equity assets, and a portfolio of low-rent housing – super funds can invest with genuine purpose consistent with the single purpose test. In doing so they would get:
Long-term exposure to large asset sub-class, one they have previously not managed to crack because of inherent transaction costs, and market fragmentation; and
Market competitive risk-adjusted returns; while
Deliver in tangible benefits to members and the community.
This is a great new opportunity for super funds and their members. I commend the shared equity pioneers such as Rismark…whom we have watched sustain interest in and advocacy on this matter. They have tilled new turf and opened a major new field for investors and consumers alike, and have done it without any explicit government assistance. They will pave the way for others no doubt but we wish them well and thank them for staying the distance.”
The inventions underpinning the EFM have been protected by thirteen (13) innovation patents awarded to Rismark by the Australian Patent Office.
Rismark’s EFM scheme dates back to work carried out by the 2003 Prime Minister’s Home Ownership Task Force, which was led by one of Rismark’s principals.
EFMs are currently being branded, distributed and serviced by leading Australian mortgage providers alongside their existing suite of mortgage products. For more information on the EFM product, please go to the website www.efm.info
Rismark’s investment funds are an important development in the asset management world and provide institutions with high growth, low volatility and well-diversified exposures to the A$3.1 trillion residential real estate asset-class.
Rismark is the manager of its investment funds, utilising sophisticated proprietary portfolio construction, investment and asset management systems.
After several years of research, Rismark’s analysis shows that the total returns to residential property in Australia have performed extremely well with relatively low risk in comparison to the All Ordinaries Accumulation Index, 10 year Government Bonds, 90 day Bank Bills, and Listed Property Trusts throughout the post-war period.
Residential real estate is also a relatively uncorrelated investment category compared with equities, long-term bonds and cash, which suggests that it could supply institutions with significant diversification gains.
In spite of the difficulties associated with acquiring exposures to residential property, Rismark believes that there is a compelling investment case that motivates the allocation of significant amounts of capital to this universe.