Managed Funds MQ Gateway and Fox Invest

Just had a look at Freeeman Fox, they have two new Funds available as well;

The Macquarie Gateway Fund and Fox Invest, which were discussed at their Investor Update in Feb (did anyone go?)


Freeman Fox - Financial Planning, Stock broking, Property, Finance

TIM ROCKS – Macquarie Hong Kong
based Equity Markets Specialist
As an independent investor, it is extremely
rare to hear direct from an Equity Markets Specialist like Tim, so this is a very special opportunity indeed.
Freeman Fox clients will have the chance to hear
the latest “inside” views and research into the
diverse and fast moving Asian economies (2 of
which are included in the 4 BRIC ‘emerging
markets’), and how they relate to the Australian and world economies.


PETER SPANN – Founder and CEO,
Freeman Fox Ltd
Peter will share his own views on what 2007
might hold for investors, and introduce some of the innovative new investment opportunities that will soon be opening up.
Peter and his research team are responsible for selecting and adjusting the mix of investments that are responsible for the
outstanding performance of the Freeman Fox
Wealth Club innovative Investment Mandates.

 

I was looking at the BRIC product - which basically is a basket made up of 4 indices that have exposure to each of those emerging markets. Brazil, Russia, India & China.

Speaking to a wealth creation manager today and their expectation is to double your money over 5 yrs.

It is a capital protected (at the end of 5 yrs) product, which you can borrow 100%.

If you borrow the 100% though Macquarie, basically you make the interest payments for 5 yrs and hope that the fund has performed well. There will be no distributions, just sell at the end for a profit (hopefully).

Initially it doesn't sound too bad, and a lot of compelling reasons are put forward as to why these markets will perform well.

Doubling in 5 yrs sounds great (compared to property which is touted as 7 to 10 yrs to double) - but given there are no distributions, an annual outlay of $10,000 for interest would give you exposure to about $115,000 worth of the fund, at the end of 5 yrs you would have outlayed $50,000 to receive $115,000 back - effectively doubling your money (and a bit).

But if you put the same $10,000 outlay towards negative gearing costs, you could control more like $250,000 worth of property (depending on rental yield) so wouldn't necessarily need to get as high capital growth to get the same result due to being able to lever more property as you receive rent to help pay interest costs.

I think the fees are relatively low - no entry, .20% p.a. management fee - I think there is a withdrawal fee within the first 5 yrs.

What are others thoughts on the investments presented?

 

So using the rule of 72 gives a 14.4%pa return. That's a few percent above the long term average for Aussie shares...but perhaps appropriate for emerging countries? Don't know. And perhaps that's the question to ask yourself.

Is that figure in the offer document? I'd be surprised to see such a forecast and in fact the "wealth creation manager" would probably get his or her behind kicked for saying so to you...

Just some more things to think about.

Cheers
N.

 

Ha - no of course they wouldn't give a forecast....

But they have provided some past performance illustrations (of course past performance is not a reliable indicatior of future performance.)

Back testing daily rolling 5 year period from July 2000 to December 2006. Average increase about 11.6%.

Most of the indexes in the basket didn't kick off until 2003 (similar to the aus market) interestingly enough.

Just curious to know if any others are considering the fund, or if others are investing in it and reasons for thus.

 

No entry fee? Freeman Fox? So pigs do fly?

Seriously though, and aside from the merits of the investment itself, I'd be steering well clear of investing through FF. The fund is available externally and so discount brokers should offer substantial savings, even if only on the MER.

As for the investment, Macquarie does make these 100% geared products tempting. As long as the underlying investment makes sense and there's a requirement in your portfolio for that type of investment, then I think the 100% gearing facility is great.

 

Hi.
We went to the Newcastle FFox seminar and heard about these products, but were not happy with having to sell up after 5 years. The more growth you make the more CGTax you get to pay. Whoopee. We would not contemplate selling one of our IPs after 5 or so years just to realize the growth, so why is this any different.
Instead we prefer to borrow against the growth without incurring any tax liability. So this product is not for us. There are other funds out there which do not require us to sell up to release the equity for further investment.
Cheers
Seaview

 

Did your financial planner suggest you sell your IPs to invest in this fund?

 

That's a good point. Not that it is the sole point in question, but definitely one for the pros/cons list.

 

I have previously seen a post re the matter of commissions with the person indicated that he recovered/saved enough money using a discount broker to pay for the first years interest.

At that time the rep from FF thank him and decried for all the hard work that FF had done finding a MB investment

Cheers