A contributory mortgage fund offering investors the opportunity to invest directly in selected registered First Mortgages over predominately residential but also limited non-residential property in South East Queensland.
The Fund objective is to provide monthly income through a selection of investments in short-term registered first and second mortgage loans.
The Fund invests in mortgages with typical loan amounts between $3M to $15M secured via a mortgage over real property located within metropolitan Sydney, Brisbane or Melbourne (For Wholesale Investors Only).
The Premium Income Fund offers Retail and Wholesale Investors the opportunity to invest in a pool of commercial loans, secured by mortgages over real Australian property.
The CFMG Monthly Income Fund is a pooled credit mortgage fund that provides investors with exposure to competitive returns and the Australian property market, through loans secured by first mortgages over real property.
The Fund is an open-ended, unlisted unit trust which aims to provide investors with an exposure to a portfolio of real estate backed loans, secured by first and second ranked mortgages.
Invest in the growth of the South East QLD housing market through First Registered Mortgages.
An open-ended fund targeting a minimum net investor return of the RBA Cash Rate plus 4.0% p.a. (For Wholesale Investors Only)
The Fund’s strategy is to provide strong risk adjusted returns by providing loan facilities for property investment & development in major cities with a primary focus on residential & commercial projects throughout Australia -For Wholesale Investors Only
The Fund aims to provide investors with an attractive rate of return and regular, risk-adjusted income by investing in a specifically curated portfolio of credit-vetted, mortgage-secured loans. (For Wholesale Investors Only)
$300m fund, returned over 11%pa since inception 100% 1st Mortgage - zero losses
The Fund offers investors the opportunity to invest directly in a range of Registered First Mortgages over predominately residential but also limited non-residential property.
Delivers investor returns through investments in mortgages against Australian real estate.
The Trust is tailored to wholesale and sophisticated investors that seek higher levels of steady passive income and capital preservation through Australian real estate secured mortgages. (For Wholesale Investors Only)
Diversify your portfolio with private credit backed by Australian real estate and generate a regular income stream.
A mortgage fund is a managed investment scheme that pools capital from investors and lends it to borrowers secured by mortgages over Australian property. Investors earn returns from borrower interest payments rather than from rent or capital growth. Mortgage funds are regulated by ASIC and are commonly used by income-focused investors, SMSFs, and retirees.
This report is an educational guide for Australian investors. It does not provide personal financial advice, does not recommend any product, and does not assess whether mortgage funds are suitable for you. InvestmentMarkets provides tools that help investors compare mortgage funds listed on its platform, including structural features such as liquidity terms, minimum investment, and the broad strategy of each fund.
Mortgage funds are often considered by income-focused investors, including SMSFs and retirees, particularly when listed income markets are volatile and term deposit rates fluctuate. But the appeal of regular distributions should never obscure the risks involved. Mortgage funds can carry meaningful credit risk, liquidity risk, and valuation risk, and those risks vary widely depending on loan type, security position, and manager discipline.
You can browse and compare the mortgage fund opportunities listed on InvestmentMarkets here.
A mortgage fund pools investor capital and lends it to borrowers, with the loans secured by mortgages over property. Investors are not buying a property, and they are not buying a mortgage directly. They are investing in units of a managed investment scheme whose assets are loans, cash, and related receivables.
Mortgage fund returns come from interest income and borrower fees, not from rent or property price appreciation. That makes them fundamentally different from property funds, REITs, and direct property.
It is also important to understand why mortgage funds exist. In Australia, non-bank lenders are a permanent part of the lending ecosystem. Securitisation is a major source of funding for non-bank lenders. The Reserve Bank of Australia has noted that residential mortgage-backed securities (RMBS) make up an estimated three-quarters of funding for Australian non-bank mortgage lenders.
The Australian Finance Industry Association (AFIA) notes that registered non-bank lenders’ total stock of loans amounted to $72.2 billion, representing 3% of housing finance nationally.
The practical implication is that a large, institutional-grade market exists for property-secured lending outside the major banks, and mortgage funds are an important channel that provides investors access to this segment.
Mortgage funds generate returns primarily through interest paid by borrowers, plus fees such as establishment fees and, in some cases, ongoing borrower fees.
The typical flow works like this: Borrower pays interest and fees → the fund receives the cash flow → the manager deducts fees and operating costs → investors receive distributions.
Several drivers shape mortgage fund returns:
Higher-risk loans generally command higher interest rates, but they also increase the chance of arrears, defaults, restructures, and potential capital losses.
First mortgages, second mortgages, construction loans, development loans, commercial mortgages, and bridging loans all have different risk mechanics and different sensitivity to housing turnover, building costs, and refinancing conditions.
A short bridging loan with a clear sale settlement timetable behaves differently from a multi-stage construction loan dependent on approvals, contractor performance, and end-buyer demand.
Management fees, performance fees, and other operating costs reduce a fund’s net returns. This is why investors should focus on net returns and risk disclosures, rather than headline borrower rates.
Credit conditions, property market liquidity, and refinancing availability can all affect default frequency and recovery outcomes. The Reserve Bank of Australia has repeatedly emphasised that arrears are concentrated among more leveraged borrowers, and that loan arrears remain highest among highly leveraged and lower-income households.
Returns are not guaranteed. Income depends on borrower repayments and the performance of the fund’s loan book.
Mortgage funds are defined by what sits inside the loan book. Understanding common loan types helps investors interpret disclosure documents and compare funds consistently.
A first mortgage is a loan secured by a first-ranking claim over a property. If a borrower defaults, the first mortgage lender is repaid before any other secured creditors. First mortgages are used for purchases, refinances, and equity release. They are often viewed as lower risk due to their priority, but they still carry risk from borrower default, valuation inaccuracies, and falling property prices.
A second mortgage sits behind a first mortgage on the same property. In a default, second mortgage lenders are repaid only after the first mortgage has been repaid in full. These loans tend to pay higher interest to compensate for their subordinate position. They are more exposed to adverse property price moves because recovery depends on sale proceeds exceeding the first mortgage balance.
Construction loans fund building works. Funds are commonly drawn down in stages through progress payments. Risks include delays, cost overruns, builder insolvency, regulatory issues, and end-buyer demand. Some construction loans include capitalised interest, where interest accrues and is paid at completion rather than being paid monthly. That can make distributions less predictable if the loan book leans heavily towards capitalised interest structures.
Development loans can fund land acquisition, subdivision, or redevelopment. They typically carry higher planning and market-timing risk than vanilla first mortgages. A project that is viable under one set of prices, construction costs, and lending conditions can become stressed when those assumptions shift.
Commercial loans are secured against income-producing assets such as industrial property, offices, retail assets, and specialised property. Risk depends on tenant quality, vacancy, lease terms, and sector conditions.
Bridging loans are short-term loans designed to bridge a timing gap, such as a purchase settlement before a sale, or a refinancing delay. Bridging finance can be lower risk when exit pathways are clear, but it can become higher risk when markets are illiquid or when settlements fall through.
Most mortgage funds mix loan types to balance yield and risk. Diversification reduces single-borrower exposure, but it does not remove systemic risk.
Mortgage funds can look similar on the surface. Most talk about income and security.
The important differences tend to show up in the details:
LVR measures the loan balance relative to the property value. Lower LVRs provide a larger equity buffer, which can reduce loss severity if a borrower defaults. Higher LVR loans may earn more interest, but they are more sensitive to valuation changes.
As a point of market context, APRA’s authorised deposit-taking institution mortgage exposure statistics for September 2025 show that loans with LVRs of 80% or higher represented 16.8% of ADI residential mortgage exposures.
Security refers to the lender’s legal claim over the asset. First-ranking mortgages generally have stronger recovery priority than second mortgages. Collateral quality varies significantly across residential, commercial, industrial, and land, and also by location and market liquidity.
Independent valuations matter because property valuations can lag market conditions, particularly in stressed environments.
Mortgage funds are often not liquid on demand. Liquidity depends on cash buffers, borrower repayments, loan run-off, and the manager’s redemption policy. Many funds have notice periods, withdrawal windows, redemption caps, or queues, and may suspend withdrawals during periods of market stress.
ASIC’s Regulatory Guide 45 sets out ASIC’s benchmarks and disclosure principles to help retail investors understand and assess unlisted mortgage schemes, including disclosure on liquidity and withdrawal arrangements.
This structural distinction matters.
Pooled funds combine investor capital into a diversified portfolio. Investors gain diversification but do not control loan selection.
Contributory funds allow investors to invest in specific loans. This increases control but concentrates risk. It also increases the importance of investor skill in assessing borrower quality, valuation assumptions, and exit pathways.
ASIC explicitly distinguishes between pooled and contributory schemes in the context of mortgage schemes.
This section explains the main mortgage fund models typically available in Australia. The names may vary by issuer, but the underlying structures tend to cluster into a handful of categories.
Pooled mortgage funds aggregate investor capital into a single portfolio that is diversified across many individual loans. Rather than being exposed to the outcome of one borrower, investors participate in the performance of the entire loan book. Risk is therefore spread across multiple properties, borrowers, and regions, although the overall risk profile still depends heavily on factors such as loan-to-value ratios, borrower quality, loan purpose, and underwriting standards. Returns reflect the blended performance of the portfolio rather than any single loan, and liquidity is determined by a combination of cash buffers, scheduled loan repayments, and the fund’s redemption policy.
An example of a pooled portfolio approach is the PMAC Trust Pooled Mortgage Retail Feeder Fund.
Contributory mortgage funds operate on a more loan-specific basis, allowing investors to select individual loans to fund rather than investing in a diversified pool. This structure provides greater transparency and direct linkage between risk and return, but it also introduces higher concentration risk unless investors actively diversify across multiple loans. Returns are tied to the interest rate and performance of the selected loan, and capital is generally illiquid until the loan is repaid or refinanced.
An example of a contributory-style fund is the GPS Invest Select Fund.
First mortgage income funds focus primarily on loans secured by first-ranking mortgages, meaning they sit at the top of the capital structure in the event of borrower default. This senior position typically reduces loss severity compared with subordinated or mezzanine lending, although investors remain exposed to credit risk and property market conditions. Returns from first mortgage funds are often more moderate than higher-risk strategies, reflecting their senior security position. Liquidity varies by fund and is governed by redemption terms and portfolio cash flow.
Examples of first-mortgage-focused funds include the ASCF Select Income Fund and the CFMG Monthly Income Fund.
Mixed mortgage funds blend first mortgages with higher-yielding segments such as second mortgages, construction loans, development finance, or commercial property lending. This diversified approach allows fund managers to target higher overall returns, but it also means the risk profile can shift over time as the portfolio mix changes. Returns may therefore be less predictable than those of first-mortgage-only funds, and liquidity depends on both the redemption policy and the extent to which underlying loans amortise or repay on schedule. These funds are often positioned as a middle ground between conservative income strategies and higher-risk private credit offerings.
Wholesale mortgage funds are typically available only to wholesale or sophisticated investors under the Corporations Act definitions. These funds may pursue larger, more complex, or higher-risk lending strategies, including higher loan concentrations, bespoke transactions, or specialised property sectors. As a result, risk can be higher and more nuanced, with greater reliance on manager expertise and structuring. Target returns are often higher than retail mortgage funds, but predictability and liquidity are usually more limited.
Examples include the CPF Property Debt Fund and the Banner Wholesale Real Estate Credit Fund.
Mortgage funds can deliver several potential benefits when the underlying loan book is well underwritten and the liquidity policy matches the asset profile:
Many mortgage funds distribute monthly or quarterly income sourced from borrower interest.
Pooled funds generally spread their loan exposure across many borrowers, projects, and property types.
Underwriting, loan servicing, covenant monitoring, and enforcement require specialist capability from the managers.
Mortgage funds can also provide access to private credit segments that have expanded as non-bank lending has grown.
These benefits should always be read alongside the balancing factors. Income depends on borrower repayments. Diversification reduces but does not eliminate risk. Professional management improves oversight but does not guarantee outcomes.
Awareness of the risks particularly matters because mortgage funds are often marketed with language that focuses on security and income. In practice, the primary risk is not whether the underlying property exists, but whether a fund’s loans can be realised, at what price, and in what timeframe.
Arrears occur when borrowers fall behind on scheduled payments. Defaults occur when borrowers breach terms and the lender enforces rights. A default process can be slow, particularly if the property must be sold in a weak market or if there are legal disputes.
Market-level arrears data provides useful context. APRA’s September 2025 ADI mortgage statistics show that loans 30 to 89 days past due represented 0.47% of ADI residential mortgage exposures.
Liquidity is often the most misunderstood risk.
Mortgage funds hold loans, and loans are not cash. If many investors request redemptions at once, the fund may have to defer, cap, or suspend withdrawals.
ASIC’s RG45 guidance is explicit that investors should be able to understand withdrawal arrangements and liquidity practices through benchmark disclosure.
Unlisted funds often have unit prices that appear stable. This can reflect valuation cycles rather than real-time market repricing. Property valuations can lag, and loan impairments can emerge abruptly when projects run into trouble.
Concentration can arise via geography, property type, borrower, or a single project. Contributory structures are inherently more concentrated unless investors deliberately diversify across multiple loans.
Higher rates can increase borrower stress and reduce refinancing options. That is one reason regulators focus on high-risk lending pockets.
Hence, APRA will implement a cap from February 2026 limiting banks to issuing only up to 20% of new home loans with debt-to-income ratios of six times or higher.
Underwriting quality varies. Portfolio transparency varies. Related-party lending policies vary.
In mortgage funds, manager discipline is not a nice-to-have. It is the core risk-control variable.
A useful comparison framework focuses on what can be measured and what can be verified.
Look for clear disclosure on portfolio composition, loan types, geographic exposure, average and maximum LVRs, valuation practices, and related-party policies.
ASIC’s RG45 exists because consistent disclosure is essential for investors assessing mortgage schemes.
Arrears data is a leading signal, but it is not a prediction. Investors should look for consistent reporting of arrears, impaired loans, and realised losses.
Underwriting quality is reflected in process and outcomes: valuation standards, borrower assessment, covenants, monitoring, and recovery experience.
Fees reduce net yield. Hence, investors should understand management fees, performance fees, and any establishment or withdrawal costs prior to investing.
Assess notice periods, redemption frequency, withdrawal caps, and the circumstances in which redemptions can be deferred or frozen.
Understand the weighting to first mortgages versus subordinated lending and development exposure.
A high headline yield can be a clue to higher underlying risk.
Here’s a checklist to help compare mortgage funds:
| What to compare | Why it matters | What to look for |
| Loan types | Determines risk mechanics | First vs second, construction, development, commercial, bridging |
| LVR distribution | Indicates equity buffer | Average LVR, max LVR, proportion above 70 or 80 per cent |
| Security ranking | Drives recovery priority | First mortgage, second mortgage, caveat arrangements |
| Valuation policy | Affects unit price realism | Independent valuations, frequency, impairment triggers |
| Liquidity policy | Drives redemption reality | Notice periods, caps, queues, historical gating |
| Arrears and defaults | Signals loan stress | Consistent arrears reporting and impaired loan disclosure |
| Fees | Impacts net returns | Management and performance fees, plus costs |
Mortgage funds are often evaluated alongside other income options. The right comparison focuses on asset backing, liquidity, volatility, and the source of income. The table below compares mortgage funds with other common income investments available to Australian investors, including term deposits, bond funds, and property funds
| Investment type | Primary income source | Liquidity | Key risks |
| Term deposits | Bank interest | High at maturity | Reinvestment risk, inflation risk |
| Bond funds | Coupon income and price moves | Usually high (listed) | Duration risk, credit risk, market volatility |
| Cash trusts | Money market yields | High | Low yield in easing cycles |
| Property funds | Rent and property valuations | Listed higher, unlisted lower | Property cycle, liquidity, gearing |
| Mortgage funds | Borrower interest | Often limited | Default risk, liquidity risk, valuation lag |
Mortgage funds can be attractive when investors want income exposure tied to secured lending rather than listed market pricing. The trade-off is that liquidity is often constrained, and performance depends on underwriting and recovery capability.
The following comparison outlines the key differences between investing in Australian mortgage funds versus direct mortgage lending
| Factor | Mortgage funds | Direct lending |
| Capital requirement | Low to medium | High |
| Diversification | Higher in pooled funds | Low unless you fund many loans |
| Liquidity | Often limited | Usually illiquid until repayment |
| Risk concentration | Spread across loans (pooled) | Concentrated in single borrower |
| Due diligence | Manager-led | Investor-led |
| Administration | Outsourced to manager | Investor responsibility |
The key takeaway is that direct lending requires the investor to assess valuations, borrower financials, legal documentation, and enforcement pathways. Mortgage funds trade some control for diversification and professional infrastructure.
Mortgage funds are generally structured as managed investment schemes or trusts. Distributions are typically assessable and can include different tax components depending on the fund’s structure and activities.
The ATO notes that managed fund distributions can include components such as capital gains that investors must include in their tax return.
Cost base adjustments can also arise under certain trust regimes, including AMIT rules, depending on the fund’s tax profile and distribution components.
Mortgage funds offered to retail investors are subject to ASIC oversight. ASIC’s RG45 sets out benchmarks and disclosure principles for improved disclosure, including liquidity, loan portfolio, diversification, valuation, and related-party lending.
This is general information only and is not tax advice.
Here are some common misconceptions about mortgage funds:
| Misconception | Reality |
| ‘Mortgage funds are conservative by default’ | Risk depends on loan type mix, LVRs, and security ranking |
| ‘First mortgages mean no risk’ | Priority improves recovery odds, but defaults and losses still occur |
| ‘Stable unit prices mean it is safe’ | Stability can reflect valuation frequency, not the absence of risk |
| ‘High yield equals high quality’ | Higher yield can signal higher risk loans or weaker liquidity terms |
| ‘Redemptions are always available’ | Liquidity can be capped, deferred, queued, or suspended |
Mortgage funds exist inside a broader housing finance and credit environment.
ABS lending indicators show that in the September quarter 2025 the total number of new loan commitments for dwellings rose 6.4% and the value rose 9.6%.
Non-bank lenders remain a structurally growing part of the lending environment. The RBA has highlighted the importance of securitisation funding for non-banks, including the role of RMBS in their funding stack.
Regulatory focus is evolving. APRA’s planned DTI cap from February 2026 reflects a desire to limit the build-up of higher-risk household leverage in new lending flows.
For investors, the key takeaway is that mortgage funds should be assessed as credit investments first, and as property investments second.
No. Returns from mortgage funds are not guaranteed. Distributions depend on borrower repayments, portfolio performance, fund expenses, and how the manager handles arrears and defaults. Even a first-mortgage portfolio can experience reduced income or capital loss if borrowers default and recoveries are lower than expected.
Risk varies materially. It depends on loan types, LVRs, security ranking, borrower quality, diversification, valuation practices, liquidity terms, and underwriting quality. Mortgage funds can carry credit, liquidity, and valuation risk, and investors should assess the underlying loan book rather than relying on labels.
If a borrower defaults, the fund may enforce its mortgage security. This can involve appointing external agents, taking control of the property sale process, and selling the property. Recovery outcomes depend on the loan’s ranking, legal costs, time-to-sale, and market conditions. Investors may experience delayed distributions or partial capital loss if sale proceeds do not fully cover outstanding debt and costs.
Units are usually valued using a net asset value approach, reflecting the value of the loan book, cash, and adjustments for arrears and impairments. Valuations tend to be periodic rather than continuous, which can make unit prices appear stable even while underlying risks change.
Generally, no. Mortgage funds are typically not liquid on demand. Liquidity varies by fund. Many mortgage funds offer limited withdrawal windows, notice periods, redemption caps, or may defer or suspend withdrawals during stressed conditions. Liquidity depends on loan repayments, cash buffers, and the manager’s redemption policy.
A first mortgage fund invests only in loans secured by first-ranking mortgages. In a default, first mortgage lenders are repaid before second mortgage lenders and other subordinated claims. These funds often aim for more defensive income characteristics, but they still carry borrower default risk and property market risk.
Many mortgage funds pay income monthly or quarterly. Distributions are sourced from borrower interest after fees and fund expenses. Income may fluctuate if borrowers fall behind on repayments or if interest is capitalised rather than paid in cash
An SMSF may invest in mortgage funds if it aligns with the fund’s documented investment strategy, risk appetite, and liquidity requirements. Suitability depends on each SMSF’s circumstances and obligations, including diversification, cash flow needs, and member drawdowns.
Yes. Losses can occur if borrowers default and the proceeds from selling the secured property do not fully cover the outstanding loan balance and associated costs. Losses can also arise through loan write-downs, delayed recoveries, and liquidity constraints that force adverse outcomes.
Mortgage funds provide exposure to property-secured lending within Australia’s private credit market. They can offer regular income and access to a lending segment that sits alongside the banking system. But they also involve trade-offs, particularly around liquidity, default risk, and valuation practices.
A mortgage fund’s return profile is shaped by its loan book, security ranking, LVR discipline, diversification, and manager capability. Investors considering mortgage funds should compare structures carefully, read disclosure documents closely, and ensure liquidity terms align with their time horizon and cash flow needs.
To explore and compare mortgage funds available on InvestmentMarkets, visit the mortgage funds page.
