Managed Funds Perpetual Protected Investments

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!

 

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.

 

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?

 

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?

 

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.

 

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...

 

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.

 

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

 

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.

 

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

 

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...

 

This is where property wins, heaps better loan rates...

 

how did you get 8% on the margin loan? I'm paying 9.25%!

 

who are you using? At what point can one start to negotiate?

 

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

Cheers,

Dan