Managed Funds Buy-write Absolute Return Fund

Anyone got any info on the new Macquarie product - Enhanced Buy Write Fund, absolute Return fund 100% geared 6 yrs timeframe, capital secure, low interest rate and high franking credit benefits. Being launched through the guy with the red ferrari! Phoned Macquarie direct but they did not have any info yet about this fund - maybe it is only for members!!

 

I don't know anything about this product. It may be an excellent tool for its purpose.

But general comments I'd make on structured products like this (having been involved in some aspects of some of them in the past):

1) you don't get capital protection for free. There must be a cost. Either they write put options to protect the portfolio or a substantial part of the subscription money is placed with a bank to provide/fund a guarantee in 6 years time (and the bank gets an underwriting fee for this so it's a double whammy)

2) capital protection typically only applies if you're invested at the end of the relevant period eg 6 years here by the sound...which leads to my next point

3) liquidity or lack thereof - sure you can redeem early typically, but there's often a cost associated with that above a normal buy-sell spread and the capital protection may not apply at the point you need to redeem.

To me one of the key benefits of investing in shares or managed funds is liquidity. If you need your money you can get it in typically 2-3 business days...

4) Low int rate - yes that's good but is that your borrowing or an internal borrowing? internal vs external isn't a good vs bad argument, just a matter of understanding the different tax consequences as well as the fact that they're both leverage which increases gains AND losses.

Just some observations...would be interested in reading PDS

N

 

Redrover,

Thanks for posting. I'm very interested in this one myself given its popularity with Foxites as well as Somersoftians. Would like to know more...

Cheers,
Michael.

 

http://personal.macquarie.com.au/pe...rnative_investments/newton/buy-write_fund.htm

Is this a different fund?

 

That is the one. Thank you.

 

I've had a read of the Macquarie Newton PDS. Interesting.

The Macquarie version makes no mention of gearing, or capital security, that must be something that Peter Spann wraps up and offers on top of Newton. I'll have to look into that.

I think the Buy Write fund could be a good income fund, but I am really really interested in the two Global Futures Funds. The first one is leveraged at 750% and the enhanced one is 1500%. Holy mama!

I find the fee structures pretty high and pretty complicated. I also note that 'we reserve the right to increase or defer fees, and to charge for other miscellaneous services'. An example of the miscellaneous service is the option for them (not currently enforced) to charge a $2562.50 'processing fee' upon withdrawal of units. Geez!

 

I looked into this further. The Mac Newton is the current version, but according to this morning's email from FF there is a new one being specifically created for FF clients and this is

.......
Exciting NEW investment product...

THE ENHANCED BUY WRITE FUND!

At the Cash Flow workshop Peter Spann will be launching a brand new, very exciting, passive investment - “The Enhanced Buy Write Fund” - custom built to Peter’s specifications and managed by one of Australia’s largest Absolute Return Fund Managers. Features of this product include:

Designed to produce a positive return, even after borrowing costs
100% Finance (to approved investors)
Capital Protected (at end of 6 year term)
Low interest rate fixed for the term of the investment
Tax Deductability of interest payments
High Franking Credits for tax effective yield

....

Queries:-
entry fees (some were as high as 4.25% yuck!! for other funds)
exit fees
all the other usual considerations!

Things to note:-
all these geared products require approval from the lender re your ability to repay and this of course gets noted on your CRAA which will have an affect on your DSR etc. for other borrowings. Contrast this with a leveraged product such as Navra whereby the shares themselves are the collateral!

Different products for different purposes I suppose. A bit of both! or ??

 

I wonder if it is possible to take out no-doc loans and invest the loan in the sharemarket, like going to Macquarie directly.

Simon if you're reading this do you know if this is possible?

 

You can take out a NODOC loan and go to Vegas if you like.

Once borrowed it is your money to do with as you like.

 

Heh, my mistake. What I should have said is can I get 100% finance (or similar) via a no-doc to invest in one of these funds? ie do no-doc loans require security?

 

Are you asking for a NODOC loan secured by managed funds? With no property involved?

As far as I am aware, the closest you will get is a margin loan with a substantially reduced LVR. They are NODOC in every sense of the word but of course the LVR is 65% - 80% ish and even 0% on some funds.

Be a risky way of doing business being geared to 100%.....