A private mortgage fund is a managed investment scheme that pools investor capital and lends it out as property-secured loans. The lender side of the structure is a mortgage manager who originates, underwrites, and services the loans; the investor side is a unit trust (or similar) where investors hold units that represent a beneficial interest in the underlying loan portfolio.
The Australian private mortgage fund market is roughly $30bn in size as of 2026, growing at 15–20% per year as institutional and wholesale capital rotates from traditional fixed income into private credit. This guide explains the structural choices inside the category, the regulatory frame, and what to look for before allocating.
Wholesale vs retail funds
Australian private mortgage funds split sharply between wholesale-only and retail offerings:
- Wholesale funds. Issued only to investors qualified as “wholesale” under section 708 of the Corporations Act 2001 — typically requiring $500k investment or accountant's certificate showing $2.5m net assets or $250k gross income. Information Memorandum disclosure rather than Product Disclosure Statement. The Archer Wealth Investment Fund sits in this category.
- Retail funds. Open to non-wholesale (retail) investors, regulated under ASIC Regulatory Guide 45 (RG 45) and requiring a Product Disclosure Statement, AFCA membership, and specific liquidity / disclosure obligations. La Trobe Financial's 12-month fund is the largest example.
The category split exists because wholesale investors are assumed to have the means to assess risk themselves, while retail investors need consumer protection. The cost is regulatory complexity for retail managers; the benefit for wholesale-only funds is faster product evolution and broader credit scope.
Pooled vs contributory
Within both wholesale and retail, two structural choices:
- Pooled funds. Investors hold a pro-rata interest in the entire loan book. Income and capital risk are spread across all loans; one defaulted loan affects every investor proportionately. Returns are smoothed; allocation is automatic.
- Contributory funds. Investors choose which specific loans to fund. Each loan is a separate sub-trust; investor returns and risk track the specific loans they hold. More transparency, more concentration risk, more investor engagement required.
Pooled is the dominant retail structure. Wholesale funds split more evenly. The right structure depends on the investor's appetite for diligence and concentration.
First-mortgage backed vs subordinated
The single biggest determinant of risk in a private mortgage fund is the position of the underlying loans on the property title:
- First mortgage funds. Loans sit in first position behind no other registered mortgage. Recovery on default is direct; LVR caps typically 65–75%. Net returns in 2026 sit 7–10% per annum.
- Mixed first and second. Fund writes both first-mortgage and selectively second-mortgage loans. Returns higher (9–12% net), recovery on second-mortgage component more complex.
- Subordinated / mezzanine funds. Loans sit behind senior debt, in second or third position. Returns substantially higher (12–18% net), recovery position substantially riskier.
The Archer Wealth Investment Fund is first-mortgage backed. The structural choice reflects the credit lens — through-cycle recovery position matters more than peak-cycle headline yield.
Regulatory frame
Private mortgage funds in Australia operate under several overlapping regimes:
- Corporations Act 2001 (Cth). Managed investment scheme rules, AFSL requirements for the issuer and the trustee, custodian obligations.
- ASIC Regulatory Guide 45. Applies to retail funds: PDS content, disclosure of benchmarks (geared, related- party, valuation, lending principles), and reporting cadence.
- AFCA membership. Required for retail-facing issuers; many wholesale managers also maintain membership for consistency.
- AUSTRAC. AML/CTF program required if the fund accepts new investor money directly.
What wholesale investors should look at
Five questions matter before allocating to any private mortgage fund:
- Track record through cycles. Recent returns in a benign environment tell you little. Look for evidence of credit performance through 2022–2024 (the rate-rise cycle) — arrears rates, recovery rates, loss rates per cohort.
- LVR distribution and concentration. Average LVR doesn't capture risk; the distribution does. Ask for LVR bands, top-10 loan concentration, geographic concentration, and security type mix.
- Underwriting discipline. Read the fund's credit policy. Look for evidence the manager underwrites the exit, not just the entry — both for individual files and across the book.
- Liquidity terms. How quickly can capital be redeemed? Most private mortgage funds offer monthly or quarterly redemption windows; some are closed-ended for the life of the fund. Match liquidity to your portfolio need.
- Custodian and audit. Independent custodian holding the legal title to securities, independent audit, quarterly investor reporting. Anything less is a structural risk on top of the credit risk.
How the Archer Wealth Investment Fund is structured
The Archer Wealth Investment Fund is a wholesale-only first-mortgage-backed pooled fund. Established November 2023, AFSL 548263, trustee Archer Wealth Investments Pty Ltd (CAR 1304974). Income is paid monthly; target net return 9–10% per annum with first-mortgage backed security. Wholesale investors only — section 708 qualification required. Information Memorandum dated 13 November 2023; copy provided to qualified investors on request.