Savings Product Review: Mortgage Backed Bonds

Monday 24th April 2006

What is it called and what sort of a savings product is it?
Mortgage Backed Bonds (MBB) are a fixed interest managed fund.

Who is the company behind it?
The bonds are marketed by AXA, one of the largest funds management and insurance companies, which listed on the Australian (and a little while longer) the New Zealand sharemarkets.

Who is the target market?
These are designed for investors who want an income generating asset which also has capital stability and regular income.

What return does it offer?
The MBBs are designed to beat the average 90-day bank bill rate each quarter by 0.5%. The current interest rate offered is 7.85%

When was it launched?
The Mortgage Backed Bonds have been on the market for around two years. They replaced two mortgage backed funds AXA ran as a unit trust and a group investment fund.

What other products are they like or do they compete with?
MBBs are in that crowded market of investments which include finance companies, bank deposits and other fixed interest funds.

Is it long term, short term or medium term?
Investors have to keep their money in for a minimum term of one year.

What is the unique selling point?
A key feature of the bonds are that their interest rate for each quarter id declared at the start of the quarter. Other features are regular income payments, and the assets its buys are generally low risk and well-researched by AXA.

How strong a stomach do you need for it?
These sit at the low end of the risk spectrum.

What�s the hitch?
The main hitch is that exit fees may be charged � especially if an investment is broken before the first 12 months is up.

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