Peter Spann 1 Day Investor Update

[Peter Spann]

$ and looks

A very enjoyable, very attractive presenter (well after hearing PS mention his wealth one of the blonde's in the front row certainly thought so and was ready to take him home).

The closer I stand to my Ferrari the more I look like Brad Pitt!

 

[Peter Spann]

Maybe not

I got the implied gist that the return is 12ish%pa for the Mac Eq Enhanced Income Fund.

Me thinks you may have gisted wrong!

 

[Robyne]

Hi Geoff,
I can't seem to get the exact URL but if you go here and look at recent sales, look at Birdwood Ave you will see it. http://www.century21.com.au/umina/

In most ways it was not bad house eg location was pretty good. Certainly our timing was out but it could have been worse. It was in pretty poor condition and that was the killer although we did get a building inspection and we were not put off by that. It didn't seem that bad on the report. It just needed something nearly every week, meanwhile we are stretched to the limit financially with all the stress that goes along with that. This was not why I started in this wealth creation thing!!!!!!

Our other property had a similar building inspection and we rarely have to pay for anyhing in that. It is a lovely little place right near Ettalong Beach. We seem to get much better tennants there too. Why? I do not know. We will keep that one.

TFB, Have tried various strategies myself and have had various levels of success. I agree with Peter that for some people it is just easier to get someone else to do it for you. Doing it yourself is fun and educational but I really just want to move ahead financially at the moment. (again see me on the treadmill). Don't want a learning period. Anyway will not be able to reply again as I am off on holiday.

Thanks for the seminar etc Peter.

Robyne

 

[gazza]

Peter

The flyer that was handed out mentioned the following fees :

base management fee 1.1%
underlying fund base management fee 1.15% or 1.55% (depending on the fund)
trailing fee 0.233%
performance fee 20% of positive returns but it then says a rebate of 25% of the performance fee applies
placement incentive recovery fee 0.5%
operational costs 0.11%
advisor fee ongoing 0.233%
loan (if taken) 0.25%

It was mentioned on the night, that the buy/write fund returned 14.04% on average NETT of fees. Are all of the fees above taken into account, meaning the only further cost to the investor is the interest on the loan and the 0.2% capital protection fee?

Also there is mention of a 3% entry commission payable to the advisors ie FF. Is that rebated at all ?

You mentioned in your post on the Canberra thread that FF was getting a 0.75% fee, is that mentioned above or is it in addtion?

thanks
Gazza

 

[Peter Spann]

Fees

base management fee 1.1%
underlying fund base management fee 1.15% or 1.55% (depending on the fund)
performance fee 20% of positive returns but it then says a rebate of 25% of the performance fee applies
operational costs 0.11%

Yes, these are fees to Macquarie - the 20% is an out-performance fee so that's why the 25% rebate occurs.

placement incentive recovery fee 0.5%
advisor fee ongoing 0.233% (same as trailing fee) loan (if taken) 0.25%
Also there is mention of a 3% entry commission payable to the advisors ie FF. Is that rebated at all ?
You mentioned in your post on the Canberra thread that FF was getting a 0.75% fee, is that mentioned above or is it in addition?

Bit confusing this, but these are fees to us - when added up they equate to 0.75% PA (inclusive of GST).
And yes we do get 3% up front which is non-rebatable.

It was mentioned on the night, that the buy/write fund returned 14.04% on average NETT of fees. Are all of the fees above taken into account, meaning the only further cost to the investor is the interest on the loan and the 0.2% capital protection fee?

Correct - when it says net of fees that includes ALL of the fees mentioned above.

I know a lot of people are fussed about fees but from my point of view the thing that I am primarily interested in is the net return and in this case the net return after all fees was 14.04% annualised PA since inception.

 

[gazza]

Excellent, thanks Peter. Like you I am interested in the net returns and just wanted to make sure that the fees mentioned had been taken into account. I assume the other one that won't be is the 0.25% if you take the 100% finance option?

 

[vandalic]

Nicely said

The closer I stand to my Ferrari the more I look like Brad Pitt!

 

[Peter Spann]

Fees

Excellent, thanks Peter. Like you I am interested in the net returns and just wanted to make sure that the fees mentioned had been taken into account. I assume the other one that won't be is the 0.25% if you take the 100% finance option?

Not sure which fee that one is (I don't have a brochure with me) but if it is a fee out of the fund then it is taken into consideration, if it is a fee out the the finance then it is taken out of the (inidcated) 7.5% interest - so in other words the net performance figure is net net - there are no "hidden" fees or fees that have not been taken into account when they calculated the net performance.

 

[geoffw]

The closer I stand to my Ferrari the more I look like Brad Pitt!

A Ferrari Pitt stop?

 

[Peter Spann]

Oh, you ARE a card!

 

[gazza]

Peter

Sounds good. Any idea of when the PDS will be ready and mailed out to those who indicated they were interested?

Gazza

 

[Peter Spann]

Should be at the mailing house on Friday.

 

[Andrew_A]

Interesting fund

Thanks for the update Peter and your contributions on this board, much appreciated.

Good point about the posters here being DIY, I certainly fit this category with trading and investing my own money. I have a pages worth of queries but will read the PDS when I get it and that should answer a lot.

A minor suggestion about the length of the presentation, I would have stayed there all day personally but even in Brisbane (The land of barbeques and no dates) people do have other things to do sometimes. 3 hours or 4.5 hours no problems as long as it's listed beforehand, I think for your presenting style you should 'overbook' your time by at least 20%

I like that you are always refining and adding to your thoughts.

In April 2005 your 3 keys to successful investing were:

1) Strategy
2) Momentum
3) Compounding

Now they have been expanded to include your idea of automation.

1) Strategy
2) Optomization
3) Automation

The big kicker for me is the performance of the buy-write fund and a few details, such as how it has no correlation with the ASX reportedly but I will wait for the PDS before getting more specific. You did mention a 'leap of faith' in trusting you with the historical performance of the dividend part of the fund. And you are leading with your own money as well.

Looking forward to hearing your update in May.

Regards,
Andrew.

** Edit.. I mean the div part of the fund having no correlation, and no 'published' performance.

 

[thefirstbruce]

Peter, I am interested in becoming a client because I want to 'automate' a lot of money 'stuff'. And have followed that up with your staff this AM.

Just a couple of points re the Mac Eq EIF...The div strip arm mentioned by Mark involved rotating through Aus, Singapore, and HK markets. I understand div stripping has better yields on average in a strongly rising market. I was wondering whether the fund could change the three markets it trades - add (Nikkei, or even DAX?), or subtract (Singapore?), as an adaptation to changing economic climate/opportunities, over the 7 year time frame....

 

[Peter Spann]

There is no specific reason why it couldn't, but the Manager needs expertise in that area so it would depend upon that.

 

[sonic]

First Freeman Fox seminar I've been to very informative will definitely be back. I'm considering investing 100K in the fund had a couple of questions crossed my mind just wondeirng if any other forum members had similar thoughts...

1) 100% financing provided by macquarie wondering what basis they used to determine if u are eligible. i currently own two investment properties worth about $170K each but because i just bought them its pretty much negative equity.... do people think this will effect the financing option?
2) the macquarie presenter mentioned that macquarie used these trading strategies for their in house properitory trading. i think this is a pretty key point which drove me to seriously consider investing, i work for an investment bank (lol its actually macquaries competitor i don't think my boss would be too happy if he found out i was buying a macquarie fund ) and i know that prop trading team generally performs pretty well in most investment houses and if the perform badly they get fired pretty quick smart and get someone new in to do better
3) 14% p.a. return after fees is very impressive but i remember noticing that the this was below the ASX bechmark stated on the flyer? it was the call-write index if i remember correctly which was being used as a benchmark.
4) any thoughts as to how buy-write strategy would perform in a non-bull market? i'm guessing that macquarie hedges the shares they buy but if the market dropped 30% overnight i'm wondering what kind of hit this kind of hedge fund will take.
5) Wondering what conditions the capital protection would lapse as it mentions on the fluyer.

I talked to someone at Freeman fox today. She was really nice but couldn't really answer most of the above questions which is expected, I guess I need to talk to someone at Macquarie...

Thoughts on issues raised above would be appreciated.

 

[thefirstbruce]

good questions sonic, and will interested in the answers too...

maybe someone can ask Steve Navra for his opinion over on Invested

 

[redwing]

sorry..in on the tail end here and haven't read the many preceding posts;

Is this a "protected buy-write" strategy?

Redwing

 

[keithj]

Is this a "protected buy-write" strategy?

Sanford Securities has this to say

Buy Writes involve the buying of ASX listed securities on SEATS, whilst simultaneously writing (selling) Exchange Traded Call Option contracts over that purchase of that underlying security. By selling a call option the writer receives a payment known as the 'premium' in return for giving the options buyer the right to 'call for' the stock at a predetermined price, known as the 'strike price'. When placing an order for a buy write you can choose to buy the shares and write the call option for a net price at the same time. For example, you may buy 10,000 MIM shares at $1.10 and write a $1.10 call option for this month for 5 cents. You could place the order to enter this transaction at a net price of $1.05 or alternatively you could 'leg' it in.

It's easy to see that a buy-write strategy is likely to underperform in a bull market. Your sold call option is likely to be exercised & you'd miss the excess gains. In a flat or downtrending market, it's likely to outperform.

I think you have to take a big picture view before picking a strategy. The ASX tide is rising, so B&H works really well.
When the tide turns, buy-write is likely to perform better. However, it's even more than likely IP will be a better place to be then.

 

[The Y-man]

1) 100% financing provided by macquarie wondering what basis they used to determine if u are eligible. i currently own two investment properties worth about $170K each but because i just bought them its pretty much negative equity.... do people think this will effect the financing option?
.

It may - although it will depend a lot on your cashflow position etc.

2) the macquarie presenter mentioned that macquarie used these trading strategies for their in house properitory trading. i think this is a pretty key point which drove me to seriously consider investing, i work for an investment bank (lol its actually macquaries competitor i don't think my boss would be too happy if he found out i was buying a macquarie fund ) and i know that prop trading team generally performs pretty well in most investment houses and if the perform badly they get fired pretty quick smart and get someone new in to do better

I was more worried in their previous internal funds about key staff members leaving....

3) 14% p.a. return after fees is very impressive but i remember noticing that the this was below the ASX bechmark stated on the flyer? it was the call-write index if i remember correctly which was being used as a benchmark.
4) any thoughts as to how buy-write strategy would perform in a non-bull market? i'm guessing that macquarie hedges the shares they buy but if the market dropped 30% overnight i'm wondering what kind of hit this kind of hedge fund will take.

KJ has already hit on this, but a flat or very slowly rising market is ideal for buy-writes. A downturn will affect the value of the bought shares, however, you can still continue to write calls against them at the lower price, and generate income.

5) Wondering what conditions the capital protection would lapse as it mentions on the fluyer.

From previous structured products, my understanding is that the capital protection can be thought of as only operational on the specified end date. i.e. there is no capital protection if you exit earlier or later than the cap protection date (6 years?)

I talked to someone at Freeman fox today. She was really nice but couldn't really answer most of the above questions which is expected, I guess I need to talk to someone at Macquarie...

Thoughts on issues raised above would be appreciated.

I suspect they can not comment until the full PDS is out.

Cheers,

The Y-man