Mortgage and asset-backed securities are in demand from institutional investors at the moment, as they look for low-risk sources of above-average yield. And they are growing in popularity with individual investors for the same reason.

Gryphon Capital Investment, a specialist fixed income asset manager, issued 30.9 million new units in its Gryphon Capital Income Trust at A$2.10 a unit last week, with the issue taken up by sophisticated investors.

The Gryphon Capital Income Trust manages a portfolio of residential mortgage-backed securities and asset-backed securities, with 99 individual note holdings. It has a target return of the cash rate plus 3.5 per cent and its portfolio has a high proportion of BBB and BB rated tranches.

At July 31, the 12-month net return was 6.3 per cent and the income distribution 4.6 per cent.

Among the characteristics that appeal to individual investors, the manager has never had a default on a note and the volatility (measured as standard deviation) is a relatively low 6.8 per cent.