Capital Protected Products/Funds?

[redwing]

Just looking back through some of the old threads and back a number of years, there were a number of Managed Funds discussed on the Forum, including NAVRA & SPANN funds amongst others

There were also discussions of members getting into some of the Capital Protected Products/Funds

Being a few years down the track now;

How have these products performed if you got on board?

I attended NAVRA & SPANN events and from memory, Peter SPANN was tied up with Macquarie at the time.

I decided not to go with the Funds being promoted by Peter SPANN at the time due to the complexity of such and my lack of understanding of the products

I also decided against going with some of the Capital Protected Funds my Financial Planner at the time was recommending, though both he and the accountant next door jumped in with both feet on several, gearing into these with buku dollars

I did invest with NAVRA and was happy with that decision, as well as my re-investing income generated strategy for the SMSF, though I eventually hung on a bit too late with the choppy waters of the GFC. I did put on the lifejacket and get off the ship and into my little dinghy at last though, as any growth/return of capital looked like it was a long way off for the ship

Others such as MichaelW timed their exit much better than I ...note to self (act faster), this delay in acting also bit me with responding to the WBC 4.99% rate window (I must have lost my note to self?).

Macquarie Bank, Babcock & Brown, REIT's and a number of similar companies and funds all took a beating over the ensuing period

Both NAVRA and SPANN have gone on to release new funds, and a recent email from EXCELA (Welcome To Wealth) has prompted this thread and the query as to how investors who got on board some of the earlier funds, including the Capital Protected funds have fared?

It's always interesting to look back and I'm happy to learn some lessons from others

 

[Aaron_C]

Capital protected funds are ****....pure and simple. They charge you an 'interest rate' of 16%+ which you paid upfront in order to get a big tax deduction. It was just a put option built into the price, and this was more expensive than just buying that put option on the ASX.

But now the ATO has disallowed any deduction that has an interest rate over the RBA penalty rate (~9% from memory) so these products are not as attractive as they once were.

 

[Piston Broke]

Both NAVRA and SPANN have gone on to release new funds

That's standard practice in the industry (all funds do it) because you don't need to show previous crappy returns and sell it the "next best opportunity".

 

[The Y-man]

We took out some fairly significant loans into these products (as a bundled pakage @ 9% as Aaron alludes to).

Unfortunately they have in all but one case gone to the "worst case scenario" (i.e. loss of money equivaent to the interest payment during life of contract). While we had a range of poducts - at the end of the day they were pretty much all hit the same way by the GFC (hey aren't hedge funds meant to hedge?) ....

I guess the main thing is this - understand the worst case scenario can happen and be prepared. Make sure the full term interest payments are what you are prepared to lose in that scenario - and that yo have the cash
(flow) to service it.

Also understand the "cash lock in" mechanisms written into these products which minimises the risk to the banks (not you!) - i.e. when the value of shares etc drop, these fund are in most cases cashed out and stuck in essentially a term deposit, and can not be reversed back into shares once the market picks up.

The Y-man

 

[twodogs]

Easy answer, just so no.

Otherwise, a year or two later, you will be saying

Oh no, Oh no, Oh no.....