Pepper Australia is stepping up efforts to promote a specialised fund that has been established to invest in mortgage-backed securities, including those that help finance its own loans. Through Pepper Investment Management, the firm recently launched its High Income Fund, a fund targeted at wholesale investors. At present, the fund has around A$17 million under management and aims to build this up to between $150 and $200 million.     Liberty Financial and FirstMac are two other mortgage managers that in the last year or so have taken steps to widen the pool of investors in mortgage-backed bonds, though both have set up funds targeting retail investors. Liberty has about $13 million under management in its term investment fund and an unknown amount in a second high yield fund. FirstMac has $20 million in its High Livez fund. Patrick Holt, of Pepper Investment Management, said that RMBS was "a difficult-to-access product in the marketplace." "We think RMBS is currently an extremely cheap asset. As a credit asset, RMBS offers a lot of features that… [are] appealing to investors seeking an income profile in their investment strategy." Holt said the fund was aimed at "a broader base of investors that understand the opportunity that RMBS offers", such as family offices, high net worth individuals and institutions. He said Pepper "launched the High Income Fund to target the sweet spot in the marketplace, that being the mezzanine part of the capital structure that has traditionally sat on the ADI balance sheets prior to APRA guideline changes." "The key attribute of this asset is that it produces regular income. A high percentage of the income comes through a monthly coupon." The target annualised return on the Pepper fund is the bank bill swap rate plus five to six per cent. The fund is currently distributing a monthly coupon of BBSW plus three per cent, with excess income distributed to investors semi-annually.Holt added, "The fund has returned over 10 per cent annualised net return to date." The fund's investment committee excludes votes by Pepper representatives when considering Pepper's own securities.