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Macquarie ALPS 5

Discussion in 'Managed Funds & Index Funds' started by MrDarcy, 7th Feb, 2006.

  1. MrDarcy

    MrDarcy Well-Known Member

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    Macquarie have released a new ALPS series

    www.macquarie.com.au/alps

    I have previously considered these but not proceeded (mainly as I invested in NI instead :p ). This series is with US stocks.

    Anyone have any thoughts or experience with this or previous ALPS series ?
     
  2. Glebe

    Glebe Well-Known Member

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    I don't have any experience with the ALPS series. Looks good if you are concerned about risk yet still want high yields. The knockout events is an interesting concept. I wonder how many knockout events there will be over the next 8 years. I note you can gear 100% with this product, and can buy more or sell down over the ASX.

    Not a bad product really in my mind...
     
  3. Simon

    Simon Well-Known Member

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    How do these compare with Series 11 OM-IP 220 Limited ?

    Seems they have had a better past performance record and possibly a more secure capital guarantee original capital plus 50% profits locked in each year (although previous losses are recouped before the next years amount is locked away.).

    Info at:

    http://www.maninvestments.com.au/220/index.cfm

    Would enjoy some views.

    Thanks
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

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    I did some work in a professional capacity on a couple of the earlier series of OM-IP investments. The reality is that you don't get nuthin for nuthin. The rising capital guarantee is a feature which obviously appeals to the conservative investors but remember it is ONLY capital guarantee AT MATURITY. From memory that's typically 7-8 years away. Whilst there is provision for early redemptions, as I recall it the capital g'tee did not apply in those circumstances. The cost of providing the guarantee is taken out of the subscription monies, leaving less for ultimate investment.

    Also, some of these types of investments are then internally geared (well they have to make up the equity that went to fund the capital protection on day 1 somehow ;) )

    More importantly, I still defy any investor, having read the prospectus to understand what happens with their money after it goes to those Cook Island companies...To me the earlier OM-IP series seemed like a "black box", fixed-term, illiquid style investment. For those reasons I haven't looked at any of the later series or similar products like MacBank's ALPs.

    Each to their own, but remember anything which seeks to mitigate market risk like a capital guarantee has to be paid for somewhere...In the series I worked on about 50-60c of each dollar went to the bank to fund the capital g'tee which had to be potentially drawn on 7 years down the track.
    I try to keep it simple stoopid! ;)

    btw none of this is any secret insider's view or taking out of school...it's all in the prospectus...somewhere.

    My 2.2 cents worth.

    Has anyone else had experience with these "structured" funds?

    N.
     
  5. jscott

    jscott Well-Known Member

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    Is anyone able to explain how an ALPS works... I've read the prospectus for the Macquarie ALPS 5, but it doesn't seem to mention anything about how the fund actually works? How do the basket of shares and knockout events relate to buying shares, options? Do they use warrants of some kind? I'm still new to the share market game so trying to digest the differences and pro's and con's between managed equity funds, various hedge funds, LIC's, Property trusts, listed and unlisted, etc. etc. etc. :confused:
     
  6. Nigel Ward

    Nigel Ward Team InvestEd

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    Hi

    You really should talk to a finanical adviser about the product. By law they are the only people who are licensed to advise you in relation to a "financial product" (which this is).

    Perhaps one of the two Marks, Steve or Nick could assist?

    N.
     
  7. jscott

    jscott Well-Known Member

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    Thanks Nigel. Anyone else have any ideas? Oh... do I need to check with a financial advisor (by law) on how to do my shoelaces up - I want a double-knot? (sorry, but I hate political correctness - its killing our country).

    It just defeats the purpose of having a fourm I think.
     
  8. Nigel Ward

    Nigel Ward Team InvestEd

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    Yeah it's a bit over the top isn't it. But the pollies feel the need to BE SEEN TO BE protecting people from their own stupidity...which apparently seems to require giving them really L O N G documents they (with your notable exception of course :D ) never read!

    There are moves afoot to simplify and shorten disclosure documentation BUT technically only someone with an appropriate Australian Financial Services Licence can advise about financial products and services...

    Just remember it's for your protection :rolleyes: :confused:

    Cheers
    N.
     
  9. jscott

    jscott Well-Known Member

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    yeah I know... But I'm not planning on put money into it - its just for my education? I am interested in how they work. I promise I won't take any of the provided info as true and will forget it all straight after reading it. ;)
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Nigel - while I think a reminder for people to speak to their financial advisor is okay - I also think that explaining how something works is a lot different to advising them to invest in it. C'mon - if you know - we want to know too.

    Or was that just a sly way of saying "I worked on them, but I still don't understand them" :D :D :D :D
     
  11. Tropo

    Tropo Well-Known Member

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    Do not forget that education (good one) costs a bit of money these days...
    Consider reading a book/s "Fast Money & 2,3,4" written by Edna Carew and you should be able to find answers to your questions.
    :cool:
     
  12. jscott

    jscott Well-Known Member

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    Yes, I agree education costs money, but isn't that what this entire website is all about - InvestED (ED for "education"). And... it did cost me money to join. I wouldn't have joined at all if I new I wouldn't learn anything.
     
  13. Tropo

    Tropo Well-Known Member

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    I tend to agree with you, but I guess that only somebody with extensive knowledge on this subject, can give you an answer to your questions.
    ;)
     
  14. jscott

    jscott Well-Known Member

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    Hi Troppo... Have you read the two books you mentioned "Fast Money & 2,3,4" ? Are they a worthwhile read and explain the concepts behind all the different types of managed funds and LIC and ALPs etc? Maybe I should become a fin.advisor myself, then I can tap into the secret knoweldge - haha.
     
  15. Tropo

    Tropo Well-Known Member

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    Only "Fast Money & 4"
    Both are very hard to read but you will find some worthwhile info.
    To make your life easier, consider www.google.com.au and you can find a lot of info over there.

    "Maybe I should become a fin.advisor myself, then I can tap into the secret knowledge".
    Frankly .... that would be the best way to go...... :)
    :cool:
     
  16. jscott

    jscott Well-Known Member

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    Well I did a bit of research on the internet and am not afraid to describe how the ALPS 5 Macquarie product works for those that would like to know:

    Essentially the ALPS 5 fund will write barrier options to produce income over a basket of 80 carefully selected U.S. stocks for a fixed period of approx 7.5 years. At current interest rates approximately 35% of the invested funds will be used in this option writing strategy. The other 65% of invested funds will be used to provide the capital protection via a "zero coupon bond". This is essentially just an investment that doesn't pay yearly returns, but just reinvests in itself and after the 7.5 year term of the ALPS 5 investment will have grown to cover the initial amount of capital invested.

    For further details you can have a look at this report by AEGIS on the investsmart website: ALPS 5 pdf .

    (Barrier options are a type of option where the option to exercise depends on the underlying security crossing or reaching a given barrier level.)
     
  17. TryHard

    TryHard Well-Known Member

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    I understand the essence of jscott's comments - its nice to think this is a community where people can give their unbiased opinion on anything without reverting to the "consult your financial adviser" angle - if we all consulted our financial adviser about everything, we'd hardly need to be a member here. And we'd also be sold everything that suited our financial adviser, and maybe not us :)

    Then again Nigel has given me some great advice from his significant areas of expertise, in response to me as a member of this forum, so I'd be the last one to criticise his caution about giving advice, if for whatever reason he is not comfortable to post it here. I thought his comments were pretty open, actually.

    I guess you have to draw a line at the point if no one on here knows anything about a subject, or if they aren't prepared to comment, then that's the way it is. We paid to join, but if the couple of hundred bucks is an issue, probably more things at stake than an investment in yet another fund ;-)

    Personally I think InvestEd continues to be excellent value for money. The moderators / contributors respond promptly, and the fee to join prevents threads being hijacked by the "instant expert just add water" crowd - I'd rather no advice at all on a subject, than the rants of lunatics claiming to be experts.

    Having said that, I just hijacked this thread. I haven't added any water, but there's some really bad red to be disposed of, so I'll go away now... :)

    Peace in posting
    Carl
     
  18. Nigel Ward

    Nigel Ward Team InvestEd

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    JS, thanks for giving us the ALPS 5 description in a nutshell.

    For the reasons I outlined earlier in the thread discussing the OM-IP products I still think these types of capital guaranteed, fixed-length investments limit your flexibility. Or maybe I'm just a bit dumb and need to keep things simple :rolleyes:

    From memory there were some early funds of this type (not Macquarie or OM-IP) that basically blew all their money early on and the poor investors were left in the position of just waiting out the remaining 5-7 years just to get their starting capital back via the guarantee. So 8 years of basically going backwards due to inflation...with no real option to redeem early as the capital guarantee only applied at the conclusion of the investment period.

    Whilst these types of investments may be suitable for some, I reckon most people would be better off with a more bog-standard managed fund with an investment approach that is understandable and which is liquid.

    I think you've always got to ask yourself the question: if this is such a good investment, why is a capital guarantee required? Sure it may be good marketing but hang on, surely the 65% that's put to the zero coupon bond to fund the capital protection could earn some good returns for you in a less exotic fund? To draw an analogy it's a bit like rental guarantees on new apartments. If it was such a good investment property why does it need to be supported by a rental guarantee? And surely that's built into the price you're ultimately paying?

    But of course read the PDS for any product and seek appropriate advice :D
     
  19. jscott

    jscott Well-Known Member

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    Yes I agree totally Nigel and I don't think these investments are for me either. The whole idea of them is that they dedicate a percentage of the invested funds to providing the capital protection so that the remainder can be used in very high risk areas. The worry with the ALPS products is that the basket of reference shares is so large - 80 stocks and that you only need a couple of kockout events for your yeild to drop to zero. The capital is protected but thats a huge opportunity cost.

    Anyway - above all us - its best to have the knowledge of what they are and at least a basic understanding of how they work. If you just read the prospectus on these things its often very hard if not impossible to work out what the fund does...

    (I'll have to find this OM-IP thread of yours now :D )

    EDIT: Just wanted to add to the info above that because the interest rates are quite low these days the amount of fuinds dedicated to capital protection is a lot more than used to be required - ie. with ALPS its currently 65%.