View Full Version : Kickout Bonds

19-11-2010, 07:37 PM
Anything like this in NZ or Aust\

Almost a fail safe investment with high returns eh


20-11-2010, 02:04 PM
Sounds too good to be true....

On the other hand,.... I had a quick look at the link.

Are these just capital guaranteed investments where you get some percentage of the index gains, but never less than your investment?

If so, anyone can achieve that for themselves, you don't need to pay someone to do it, and to boot, you get dividends too (which most of the guaranteed capital investment spruikers keep for themselves).

Perhaps I am being unfair, and not understanding what they are offering?


20-11-2010, 04:22 PM

24-11-2010, 09:20 AM
Liontamer is a very similar product. The difference here is an "autocall" feature which knocks the deal out if a particular return objective is achieved. You are trading off current income for a call option on an index. Issues for me are why not invest the cash and buy a call option (as was alluded to above), what is the credit quality of the issuer (see Credit Sails etc) and the taxation which will treat this in NZ as a financial arrangement with the return subject to tax. Remember is not a share.

24-11-2010, 09:30 AM
Hi Dubdee,

You are trading off current income for a call option on an index.

I haven't looked into these in any detail, but you are saying that the cost to me is whatever dividends (or more generally, income) I would have received off the 'portfolio', and with that, I am buying an option to call a bundle of shares (whatever the index is made up of) at a fixed price sometime in the future?

So one way to assess this offer is to decide what I think that portfolio of investments would have given me in income, and compare that to the cost of a call option on the index, and if the call option is more expensive, this is a 'good' deal, else leave it alone?

For the purposes of simplification, I am ignoring the counterparty risks, and the 'benefit' of this being packaged up for a retail investor - whether that is good or bad is another thing entirely.



24-11-2010, 03:22 PM
Alan not quite. Its the upside only on the shares that you buy, not the downside. Therefore more option like than "long shares" like. Because its a derivative there is no capital cost other than the option premium which is taken by the promoter in the form of income on your investment forgone. In this structure the autocall is in effect created by selling options at higher stike prices which lock in the capped autocall return reducing the cost of the option strategy to something like the interest earned ion the cash paid for the security. Generally there a pretty decent fees taken by the promoter on these sorts of things and the security is only as good as the collateral (name) backing your investment. I did one a few years ago called GEMs. It was listed on NZX so your return could be zero or the capped return and an uncertain term of investment if in between.