Managed Funds My complicated situation

Final Figures

Early January 2007
Original investment of $150,000.00 to Leveraged Equities, comprising of:
$120,000.00 my own funds comprising my savings and LOC, plus $35,000.00 Margin Loan from LE.
The securities comprised of:
Macquarie Property Income Fund, amount $30,000.00 allocated. 18,757.21 units, unit price $1.5594, value $29,250.00 Fee: $750

Colonial First State First Choice Investment Platform:
Colonial FS BT Core Australian Share: $20,000.00 allocated. 12,244.8980 units, unit price $1.5925, value $19,500.00 Fee $500

Colonial FS Colliers Global Property Security $20,000.00 allocated. 11,331.9386 units, unit price $1.7208, value $19,500.00 Fee $500

Colonial FS CFS Geared Global Share $10,000.00 allocated. 12,879.7886 units, unit price $0.7570, value $9,750.00 Fee $250

Colonial FS CFS Geared Share $40,000.00 allocated. 17,099.2634 units, unit price $2.2808, value $39,000.00 Fee $1,000.00

Colonial FS CFS Property Securities $30,000.00 allocated. 19,557.3683 units, unit price $1.4956, value $29,250.00 Fee $750

MPIF $30,000.00 allocated. 18,757.21 units, unit price $1.5594, value $29,250.00 Fee $750
Grand total $150,000.00 Invested.

Total distributions for all funds till today Oct 07 = $18,334.95
Total fees for all funds till today = $ 4,974.69
Nett distributions total = $13,360.95

Margin loan with LE at 9.4% prior redemption $36,037.85
And interest on my LOC at 8.32% , don't have the figures here right now,
but all distributions paid to me went straight back to the Margin Loan and my LOC.

Redemption prices are approximate, as at 17th October 07, however not all units were sold on that date, so the actual price is little lower.
Still waiting for the final paperwork mailed to me.
So, at 17th Oct prices were:

Macquarie Property Income Fund,: 18,757 units at $1.265 ,value at $23,725.73

Colonial First State First Choice Investment Platform:

Colonial FS BT Core Australian Share: 12,244 units at $1.733, value $21,21640

Colonial FS Colliers Global Property Security :11,331 units at $1.426, value $16,154.51

Colonial FS CFS Geared Global Share : 12,879 units at $0.744, value $9,587.13

Colonial FS CFS Geared Share : 17,099 units at $2.80, value $47,880.62

Colonial FS CFS Property Securities : 19,557 units at $1.431, value $27,980.20

Total paid menett of LE margin loan, paid first to LE), $108,586.25
My initial outlay (without the margin loan) was $115,000.00
So, considering the nett distributions received of $13,360.95, the total amount for me stands at $121,947.20


Glebe thank you for the deep breath advice! Yes, the situation now seems quite good.
And everyone who helped me so much with my query, thank you for your time, knowledge and advice.
Much, much appreciated.

Now I can move on, and concentrate on other matters, and persue my style of investing that I enjoy and understand.

I will still get advice and more info on Fusion, but for now I had enough of paper shuffling, faxes and phone calls.
Time to take a break and get some fresh air, see friends etc.

Ivested, this is a great forum.

Many thanks,
GMG

 

Glad to hear it has worked out ok.

Ultimately I think the moral is:

* understand what you are getting into. If you don't understand, don't get into it.

* don't follow blindly what financial advisors say or recommend. The investment or strategy must pass your own tests.

 

Hi GMG,
I have read this thread with interest but i just need to add a little. While i agree with some points of your opinion on the FF organisation i just can't get past two questions:

1. You entered into a whole lot of Managed funds which are a 3-7yr investment vehicle (ie medium term) yet get out after only one year. You paid entry (and exit fees) and for a 1yr investment they are large... Yet over a 5yr period would they be such a factor??

2. Your quote below.... You don't have to open your mouth At some point you need to take responsibility for all this? You read the PDSs, you signed the forms...

Yes this is probably argumentative but i just can't see how all blame is on FF and their wealth creation managers. Would you be complaining if you got into all these funds and they return 20+%??

Food for thought

DaveJ

P.S. I Don't have any link to FF... Other then doing their course in 2001

 

Thanks Glebe.
Very well said. And lesson learnt. I will stick to what I understand.
And no more following blindly the f planner's advice.
For now I will stick with my trusted accountant, and listen to my own advice, research and gut feeling.
Someone once said to me : "If in doubt, do without".
Amen.

 

Hi GMG

I have been following your story with interest. Please post an update on your Fusion fund redemption as I have a friend in a similar situation with a change in circumstances who is looking at redeeming. We are going through the cost/benefit and would be interested in your experience.

Thanks in advance

 

Hi DaveJ,
1. yes I did get into these arrangements last year. Last year my situation was different. And yes, I did fall for the hype. However, I'd rather pay the large entry fees and get out ,as my situation has changed, and I have few resi projects in mind. Secondly, the property trusts supposed to be the losers due to current climate (Aust dollar, US subprime crisis, stock market doing wobblies and possibly nearing to a bear cycle).
I don't have too many years left prior re-tirement, hence I am changing my strategies. I am not interested in waiting another 3-5-7 years for the market to get better.
As I mentioned earlier, had I implemented my preferred strategy of getting another investment house in Brisbane, I would have been now so much better off. Instead I allowed myself to be talked out of it by the adviser.
Yes, it is my own fault. Yes I made a mistake. I am moving on now.

2. Yes I did sign the forms, yes I thought it was then a good idea.
Yes, read the PDs, there were too many of them, and for me complicated clauses to understand. Next time I will get a lawyer to help, if I ever decide to go this path again.

Although it does appear I am blaming ff here, I am annoyed with myself too.
I made much better returns on my property investments, and again I add, I UNDERSTAND the property side of investing. Have been doing it for the past 19 years.

What I feel most concerned about is that with the capital guaranteed products, such as Fusion funds, the PDs is 129 pages long!!!
So, the least I would expect from my adviser, would be a warning that even though my "capital is guaranteed" (100% loan from M bank with compulsory put option purchase), I CAN STILL LOSE MY INTEREST PAYMENTS over the next 5 years. Potential loss of $90,000 is a serious amount to gamble with.

And now, understand that every few months or so, I am being mailed more managed funds investment options.
Go to the Investor update, hey, more managed funds to consider.

While I was working full time in a very demanding job, often being away overseas for prolonged periods of time, I was made believe that these investments will be good and appropriate for me.

Now, I have more time to do research, and make better choices.

And yes, it is my own responsibility to look after my affairs.

Look Dave, there are other members here who found Fusion confusing to say the least, and some are getting out for similar reasons to mine.
Again, Fusion made $27,000 or so gain for me in the 12 months or so.
Considering the interest payments, put option charges, and the whole uncertainty for the next 5 years, the profit is not very good.
This will be the last time I will repeat this:
Had I bought another investment house in inner Brisbane last year, I would have at least another $100,000.00 gain in equity. Great for leverage, and repeating the process again.
My other house, in the 9 months I had it, appreciated $130,000.00
Not to mention there will be a better value when the DA is done, as it is a development site.

So, Amen to all this.
I made a mistake, or few. Learnt lots.
Not interested to discuss this forever, debate indefinitely, explain, etc.
Amen. I have learnt my lessons. And valuable lessons.

Cheers,
GMG

 

Hi Dave

If I may I would like to discuss your points further.

I agree she entered into a number of MF's but FF does have to take the whole blame, not so much for the lack of performance as this happens, but more because PS gets up there and does a song and dance and convinces his followers that the deal is better than sliced bread.

I am sure that if the controlling body sat through his presentation they would raise more than an eyebrow.

As far as reading the PDS etc, why then do you need a FA. Are they not supposed to advice you and guide you through the process making you aware of the validity and risk's of the proposed investments. They are certainly going to collect a fair commission for forwarding the completed paperwork.

To digress - I know that in the case of the capital gaurentee investment there was no mention of the way that the threshold management mechanism would actually operate in the presentations. In fact there was no mention of anything but the glorified positives.

This threshold management actually means they can simply freeze the investment, exit the volatile markets and lodge the remaining funds on deposit waiting out the time all the while collecting your interest payments on the same money. What is worse that if this was to happen then not only have they frozen the investment process but they would also freeze any withdrawals so you would be stuck making a loss until the end of the period.

It is this threshold management on top of the abysmal performance that convinced me that the going was good before they actually froze the whole shooting match.

As far as the comment re the 20%. No I wouldn't be complaining because they would have performed in line with the rest of the market (more or less) but they didn't they in fact performed abysmally in a booming market so what would they do in a mediocre market.

Anyway we all get our lives lessons along the way and some cost us a lot and some come free.

Cheers

 

Hi lauries.
Yes, of course. I will do that. Right now I need few days break, before I start my enquiries.
With all the latest redemptions, and still sorting out the super roll-over that my fa messed up, I need a little break.
My brain hurts.

However, I am very interested in your friend's siutation. Mine has changed, for the better I think, but it requires different strategies.
Please PM me with your contact number, and I will do the same with mine.
I think this discussion now should proceed privately.

 

handyandy,

great explanation. You did it very well. Now it makes more sense to me, and also more warnings.
I agree, if the performance is poor/ mediocre in a booming market, what hope do we have in a worse performing market.
The treshold management is a worry. Pity this was also not explained to me.
But hey, read the 129 page PDS and make sense of it!

I agree, if all we need to do is to read the PDS, what need there is for a fa?

And yes, hype and huge following does not represent good/ethical/personally tailored advice.
It is just glorified managed fund sales agent/s.
And how many of these so called experts have actually any assets behind them, let alone assets and experience?

Anyway,
Amen. Common sense prevails.

 

Hi GMG,

I'm confused as to why you are geared if you are so worried about investments? Your adviser obviously misunderstood your actual risk profile.

For the interest payments being tax deductible, this is normal for borrowing to invest, whether managed funds, residential property and any other asset you can think of (except for superannuation).

Can't you take a LOC against a property you have to tide you over until you get another job?

Cheers,

Dan

 

Hi ASX broker,
I am not afraid of gearing. Been doing it for the past 19 years. The only time I lost some money was when I invested at the end of the stock market boom, and yes, managed funds.
I geared into Telstra warrants, but with the T1 investment(not geared) and the warrants that returned good profit and dividends, I then sold at $8.05 per share. That was a good decision then.

I have no problem with gearing, I only have problem with gearing to invest in the stock market, either via shares or managed funds, especially at the end of a golden run. Advised to do so by fa.
Yes, for the umpteenth time I know I do not fully understand this part of investing.
Resi property always proved good for me. I have some control here, even if the prices drop (never in the areas I invested), I could still renovate, make an addition, sub-divide, etc.
In the share market I cannot paint the side of ANZ bank, re-do another's company's office, or change the management.
I am at the mercy of so many variables.
My houses have not disappeared, but HIH did, so did Westpoint, I think ACR, FAI, and the list goes on.

Please, this is not a thread to state which investment practice is better.
it is just in my Own situation resi worked better for me.

The fa thought I was "overweight" in direct property, and that property was too risky. Yet he gave me examples of St.Mary's in Sydney's western suburbs.
I did not invest there.

Perhaps my risk profile was not correct.
I have enough to get me through, have enough Loc, can get another one if I need to.
I just don't want to be concerned about the $90,000.00 or so in the next few years, if the market does poorly. This money I can put to much better work elsewhere.

Once again,
I will stick with what I know best and enjoy.
Got to go.
Thank you all for the advice and help.
I am moving on.
Cheers,
GMG.