Managed Funds navra capitol protected product

Discussion in 'Shares & Funds' started by voigtstr, 9th Oct, 2008.

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  1. voigtstr

    voigtstr Well-Known Member

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    Did anyone go to the Melbourne launch last night? I'm not a NFS client so I cant post on the navra site. What did people think of the product? 100% finance sounds good, since I dont have any spare equity at the moment (or cash) but then cashflow itself becomes a problem, even at the minimum purchase amount which I think was 100k.
     
    voigtstr, 9th Oct, 2008
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  2. Simon Hampel

    Simon Hampel Founder Staff Member

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    Capital protection is a nice idea - but it does come at a price ... you could find yourself in a situation where your investment is worthless (but the protection means you don't have to pay the loss back), but you are still required to keep paying interest for the remainder of the loan term (up to 7 years). Paying interest on an investment you know you won't make any money from is not fun.

    That being said, buying in at or near the bottom of the market (rather than at the top) is likely to avoid most of those issues.

    Key things: less flexibility than a margin loan, higher cost than a margin loan, but potentially more protection than a margin loan and generally less capital required up front
     
    Simon Hampel, 9th Oct, 2008
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  3. try anything once

    try anything once Well-Known Member

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    Good idea last year

    I think I would rather be in the business of offering capital protected products rather than buying them given how much the market has fallen - particularly if you have a min 5-7 year lockin period. Would have made a lot of sense at/near the top of a bull run last October. Does anyone really think todays prices are higher than what we will see in 5years? Allowing for the capital protection premium in the financing, I'm guessing you would have to believe the market will be at least 15% below todays values 5-7 year from now.
     
    try anything once, 9th Oct, 2008
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  4. voigtstr

    voigtstr Well-Known Member

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    I think if this product had been launched at the top of the market, then the product would have moved the money from the navra fund into cash by the time yesterdays big drop occured. With this product once they have 30% drop and move completely into cash I dont think they can climb out of that, and you would only get your initial investment back at termination. You wouldnt be able to get the upside navra unit growth.

    I think this product has a particular place, and that is for people that have already lost units due to margin calls etc. This product 100% geared allows them to buy back those units (and pay the interest along the way) and effectively recover their position. I think the capitol protection is a requirement for the finance side of things.

    It probably isnt the product for me, since I havent lost any units due to the market decline. I'll probably just have to plod along and buy more units next year in the retail fund once I have some savings goals out of the way.
     
    voigtstr, 9th Oct, 2008
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  5. Simon Hampel

    Simon Hampel Founder Staff Member

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    As mentioned by voigtstr ... these products stand to show their worst when buying near the top of the market ... you have the potential to lose all of your upside potential (ie you get moved to 100% protected mode) ... while still needing to pay off the interest for another 5 - 7 years. That can be a huge hit.

    These products work best for a rising market when there is a ratcheting protection level which moves up as your investment value moves up - thus protecting you from potential downside in the future. I'm not sure if the Navra product has this feature.

    I'm not in favour of the lack of flexibility offered by these protected products - but that's just my preference ... it may well suit some people's investment style. I prefer regular margin loans, but acknowledge that they do require far more management than a capital protected loan would to achieve similar results.
     
    Simon Hampel, 9th Oct, 2008
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  6. voigtstr

    voigtstr Well-Known Member

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    If someone could ask Steve on the navra forums, why they didnt opt for the ratcheting protection that Sim mentions, that would be dandy. As I understand it, only your initial investment is protected (with this product), not any subsequent growth.
     
    voigtstr, 9th Oct, 2008
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  7. OLI__

    OLI__ Well-Known Member

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    How does the capital protection work? It sounds like the lender sells your Navra units once the unit price drops below a certain value? Does anyone have an example of how it would work or more detailed figures?
     
    OLI__, 9th Oct, 2008
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  8. Simon Hampel

    Simon Hampel Founder Staff Member

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    Have to wait and see the PDS. These products are all different.
     
    Simon Hampel, 9th Oct, 2008
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  9. AsxBroker

    AsxBroker Well-Known Member

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    Hi,

    The only capital protected platform I know of that doesn't sell down units and invest in cash is the AXA North platform as it doesn't have any specific end date.

    Cheers,

    Dan

    PS This is general information, before making an investment decision speak to your FPA registered Financial Planner.
     
    AsxBroker, 9th Oct, 2008
    #9