Managed Funds Navra Instalment Warrants

Just got my invite to Uncle Steve's party.Yippee, I am important after all!
Anyway in the letter it mentions that Steve will be introducing a new product, Navra Instalment warrants.
I've tried reading up on the subject, but still can't fully get to grips with the concept.
So this involves buying the shares on lay by, paying a reduced amount to hold the shares but still getting the distributions. On the plus side no margin calls, but what's the down side?

Two more questions:

Is it possible to hold these within a margined portfolio in order to reduce the overall LVR and therefore the risk of a margin call?

And do you get to see any of the distributions, or is this automatically reinvested to pay the interest on the warrant

I do intend going to the presentation in Brisbane, but would like to do a bit of homework beforehand,
Thanks

 

So what happens when the final instalment comes due and the market is down substantially on where you thought it was going to be? May not be worth paying the final instalment. You either have to pay the final instalment or forfeit/sell the share, thereby locking in a loss, although you were protected from margin calls in the interim. If distributions go towards paying the balance of the instalment will there be sufficient distributions left over to service neg. geared property? With the fund sitting in negative territory although there may be a small distribution from trading in January/February will it be sufficient to do more than service holding costs?

Seems this is a damage control mechanism rather than anything else!

 

not that I profess to have my head around the whole process either but there is capital protection via a put option. I am trying to get an answer from Navra as to what exactly is protected with this put option

 

Hi Lorrimer,

1. Instalment warrants are a leveraged product, so mixing it with a margined portfolio would theoretically, increase your total LVR (not your margin loan LVR) though the margin loan LVR would depend on your margin lenders LVR for that security.

2. This would depend on the structure of how the warrant was set up which is individual to the instalment itself. You'd have to find out from the product issuer.

To get a basic idea of instalment warrants you can find out more at the ASX Warrants Australia - Stock Market Investing and Information - Financial instrument - ASX

Cheers,

Dan

PS Before investing in geared products speak to an FPA registered Financial Planner or a stockbroker.

 

Gazza,

It would be very interesting to also find out who is the issuer of the option.

Cheers,

Dan