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Perpetual Protected Investments

Discussion in 'Managed Funds & Index Funds' started by coopranos, 2nd Oct, 2007.

  1. coopranos

    coopranos Well-Known Member

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    Just wondering if anyone could shed some light on this particular product.
    What is the catch or cost of the capital guarantee? All I can see is normal interest rates...
    Do you have to go through a planner to access this product? If so, is it a higher than normal entry fee (4%)? Can you go through a discount broker?
    What are the 100% lending criteria (i.e. is it income tested etc)?
    Does anyone invest in any of the funds available in the product?
    Thanks guys!
     
  2. AsxBroker

    AsxBroker Well-Known Member

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    Hi Coopranos,

    PPI2 (http://www.perpetual.com.au/pdf/PPI_Series_2_PDS_wl.pdf)

    On page 10, the cost of the capital guarantee is stated as 0.65% of your borrowed amount (Dynamic Management Fee). As this is an ongoing fee versus the capital cost of buying a put option (PPI1) this fee is deductible.

    Yes, Perpetual have positioned this product so that clients get proper advice as it will affect their cashflow and they probably will need insurance to ensure that they can pay the interest costs whether they are employed or an accident happens and they can't...

    You better read the PDS especially page 10, there are no entry fees.

    Possibly...

    We've invested a few clients into PPI1, PPI2 doesn't open til 28th October.
    Perpetual teamed with Mercer to get 12 quality funds on the platform. Time will tell.

    Cheers,

    Dan

    The above comments are all factual and not advice to invest in Perpetual Protected Investments and any funds available on the platform. Speak to your FPA registered Financial Planner, Accountant or Tax Adviser before making an investment decision.
     
  3. coopranos

    coopranos Well-Known Member

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    Cheers for that ASXBroker
    So I assume the loan is income tested? What are they like as far as their lending criteria go (ie is it easy to get money!)?
    Also, just out of interest, what are the up-fronts and trailing that brokers get?
     
  4. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Loans are income tested above a certain amount - depends on how much you want to borrow. Note that if you are taking out an interest loan for the first 12 months interest costs, there is a limit as to how much they will lend you for that purpose (doesn't affect the loan limit for the normal loan). This wasn't mentioned in the PPI1 PDS - I haven't read the PPI2 PDS to check whether they fixed that.
     
  5. DaveA

    DaveA Well-Known Member

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    Sim,

    Are you considering getting into it or it is 2 long term for your focus? Are you able to swich funds once your in there???

    Do they offer normal PPT funds or are they seperate?
     
  6. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I invested in PPI1 ... not something I'd normally consider, but I had a one-time tax issue that I needed help with.

    I like the fact that you get to choose where to put your money - they have a good range of established funds (only a dozen or so, but they are good funds) ... most of which are non-Perpetual funds (CFS Global Resources is on the list from memory).

    You can't switch funds during the protection period - but if you get good growth, you can top up your investment using some of the equity.

    Personally I'd be cautious about entering such an investment ... 100% finance and capital protection do come at a cost ... and in general it is too long term for my liking ... but I decided to take the plunge and I bought into several international funds which I wouldn't normally have bought (and where I am happy to leave money sitting for an extended period).

    You really need to read the PDS very carefully - all the information is there, and there is a lot of detail ... you need to understand the gotchas with the 100% finance and how the capital protection works ... it's not free money, you can't capitalise your interest past the first year, and there are potential tax implications you need to be aware of.

    Like I said, I haven't read the PPI2 PDS, so can't comment on what has changed.

    In normal circumstances I wouldn't invest in a product like this ... I don't like having my money tied up for such long periods of time with limited flexibility (that's not to say you can't get out - but there are ramifications and costs to do so).
     
  7. AsxBroker

    AsxBroker Well-Known Member

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    Under $300k they want you to make a "stated income declaration" see Appendix A, page 77 of the PDS. Page 57, shows all the thresholds for how much you borrow.

    If you can prove that you won't have difficulties repaying the interest it shouldn't be too hard. Remember that the assets are 100% by the good people at Deutsche Bank London, so all you have to do is pay the interest because if you default they can hold for 7 years and 4 months and get dollar for dollar (albeit without interest). They'll probably chase you for interest costs.

    On page 17, the adviser fees are based on the loan amount. The upfront commission is between 1% and 2.2% (1% is standard and 2.2% needs to be dialled up). 0.65% is the standard ongoing annual commission. If you've got an expensive adviser they can dial up with the Adviser Service Fee which you have to agree to which can be an additiona 0.25%, 0.50% or 0.75% per annum on top of the standard ongoing. This dial-up amount will increase the interest cost. (Addendum - I asked Perpetual why the standard trail is 0.65% and they said they had to make it comparable to the Fusion product).

    For Dave, you can't switch into another fund after you've invested. This is basically a closed end platform. You have to set it up before the end of 28th November, because they have to agree with DB London on the protection and pay for it. You can redeem the funds but as it's a European style option, your only 100% at the maturity date. Before that date, if your down, your down and you take the loss.

    If you wanted to switch into another fund, you'd be better off using the next PPI series, Perpetual intend to run this twice a year.

    The two Perpetual funds available in PPI2 is Australian and International Equity funds page 6.

    For Sim, I couldn't find a maximum amount for the Interest Loan, but that doesn't mean it doesn't exist.

    Cheers,

    Dan

    The above information is all factual, this is not advice to invest in the Perpetual Protected Investment series or any of the funds within. Speak to your FPA registered Financial Planner, Accountant or Tax Adviser before making an investment decision.
     
    Last edited by a moderator: 2nd Oct, 2007
  8. DaveA

    DaveA Well-Known Member

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    Is that because PPI 3 allows you to switch. Twice Yearly is good however it doesnt allow you to time your entry into the market. Im not going to invest in but i think it may be good to have a view of the PDS to see how profits are distributed (ie dividends, realised gains) being a capital fund id imagine they would be conservative about this part...


    Might consider the next one though...
     
  9. AsxBroker

    AsxBroker Well-Known Member

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    Hi Dave,

    There is no PPI3 just yet, but I'm sure they are going to get cracking on it in Jan 08.

    PPI series don't let you switch. What I meant is that you would have to invest in that current series if you wanted to invest in a different fund in the PPI platform (though it may not be available depending on which funds they put on the fund list).

    There are no realised unless you sell out...At the maturity date you pay off the loan but you still get to keep the managed funds, hence no crystalisation of capital gains. Though of course you can sell them, hopefully at a profit.

    The income is DRP'd straight back into your units. I guess this is to ensure they aren't going to be stuffed over too badly if any goes wrong.

    It's not a fund...It's a platform which lets you borrow 100% (margin lend) with 100% capital protection (put/dynamic hedging).

    They can't have them opened ended as they have to calculate the amount that needs to be hedged for each fund with DB London.

    Cheers,

    Dan

    The above information is not advice to invest in Perpetual Protected Investments. Speak to your FPA registered Financial Planner, Accountant or Tax Adviser before making an investment decision.
     
  10. crc_error

    crc_error The Rule of 72

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    What is the interest rate quoted for this product? anyone have it on hand?
     
  11. AsxBroker

    AsxBroker Well-Known Member

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    P13...

    Variable 8.9% pa
    Fixed Annually 9.25% pa
    Fixed for the term (7 years and 4 months) 9.20% pa

    Cheers,

    Dan

    The above information is not advice to invest in Perpetual Protected Investments. Speak to your FPA registered Financial Planner, Accountant or Tax Adviser before making an investment decision.
     
  12. crc_error

    crc_error The Rule of 72

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    That is actually quite good.. lower than my margin loan. Only about 1% above a home loan rates..
     
  13. DaveA

    DaveA Well-Known Member

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    Ive secured a home loan at 7.64% fixed and 7.62% Variable, so its about 1.6% higher.

    Plus you have to pay the capital protection fee on top of the interest rate.

    However i do agree quite good rates for the platform...
     
  14. crc_error

    crc_error The Rule of 72

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    This is where property wins, heaps better loan rates...
     
  15. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I'm paying 8.05% on my margin loan and average of about 7.5% on my property loans, so there's not as much gap as there was once upon a time.
     
  16. crc_error

    crc_error The Rule of 72

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    how did you get 8% on the margin loan? I'm paying 9.25%! :mad:
     
  17. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    You have to borrow a lot of money.
     
  18. crc_error

    crc_error The Rule of 72

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    who are you using? At what point can one start to negotiate?
     
  19. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    I'm using Leveraged Equities.

    Most margin lenders will happily knock 0.25% off for every $250K you borrow, up to a maximum of 1% off for amounts over $1m borrowed.

    I haven't found anyone who will take more than 1% off yet ... but if you are getting into the multi-million dollar level of borrowing, other avenues start to open up for sourcing finance (I'm not there yet).
     
  20. AsxBroker

    AsxBroker Well-Known Member

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    Of course it's higher, it's secured against a contract (dynamic management) not against property.


    Sim, thats a very sharp margin loan rate, you usually need a massive loan to get a decent rate like that. Sounds like you almost got your $1m loan :p

    Cheers,

    Dan