What is a pooled mortgage fund?
A pooled mortgage fund is a managed investment scheme that combines capital from multiple investors and deploys it across a diversified portfolio of loans, each secured by a registered mortgage over Australian real property. Rather than investing in a single loan, investors gain exposure to many loans simultaneously, which helps to spread risk across different borrowers, property types, and geographic locations.
The fund is managed by a professional fund manager who is responsible for originating, assessing, and monitoring each loan within the portfolio. Investors receive returns in the form of income distributions, typically paid monthly, derived from the interest charged to borrowers on the underlying loans.
How does the structure work?
In a pooled mortgage fund, all investor capital is combined into a single pool. When a borrower applies for a loan, the fund manager assesses the application against documented credit criteria, obtains an independent valuation on the security property, and determines whether the loan meets the fund’s lending parameters, including maximum loan-to-value ratios.
Once approved, the loan is funded from the pool and becomes part of the fund’s portfolio. As borrowers make interest payments, the income flows into the fund and is distributed to investors according to their proportional interest in the pool.
Who can invest in a pooled mortgage fund?
In Australia, pooled mortgage funds are typically structured as managed investment schemes and may be available to both retail and wholesale investors, depending on the fund. Some funds, including those managed by Granor Capital, are available exclusively to wholesale and sophisticated investors as defined under section 761G of the Corporations Act 2001 (Cth).
What are the key benefits?
The primary benefit of a pooled mortgage fund is diversification. Because your capital is spread across multiple loans, the impact of any single borrower default is reduced compared to investing in a single loan directly. Other benefits may include passive management (the fund manager handles all loan origination and monitoring), regular income distributions, and exposure to property-backed credit without the need to own or manage physical property.
What are the risks?
Like all investments, pooled mortgage funds carry risk. Key risks include borrower default, changes in property values, liquidity constraints (particularly in non-liquid fund structures), and the performance of the fund manager. Investors should read the fund’s Information Memorandum carefully and seek independent financial advice before investing.
Related resources from Granor Capital
Explore how monthly income distributions are calculated in a pooled fund, and read our guide on what wholesale investors should consider before committing capital. View the Granor Lending Fund — a pooled mortgage fund for wholesale investors.
This article is provided for general information purposes only and does not constitute financial advice.
