Macquarie Fortress Notes

[winner69]

Can I assume that these have not been the best of investments

http://stocknessmonster.com/news-ite...=NZSE&N=160135

NAV down to 49 cents ...... and I thought that investing in bonds and fixed interest thingies were safe.

So the concept of 'this new world' with a host of new financial instruments and derivatives and the like that eliminate risk looks like it is all ending in tears

Wonder what the next 'new world' will look like

[peat]

a general query not relating specifically to these Macquarie notes....

Over the last few years I have noticed a number of 'capital protected' funds where they guarantee the original investment value and I assume risk only a small proportion of it to attain decent returns.

How is this sort of thing panning out in the new risk environment. Have any actually lost their capital ?

[macduffy]

I don't know how they've been performing but the capital guarantee is generally obtained by placing enough of the investment on compounding term deposit to ensure that 100% of capital is returned after x years. And for that, the bank that provides the t/d also charges a fee!
Not a great idea, imo !

[kura]

a general query not relating specifically to these Macquarie notes....

Over the last few years I have noticed a number of 'capital protected' funds where they guarantee the original investment value and I assume risk only a small proportion of it to attain decent returns.

How is this sort of thing panning out in the new risk environment. Have any actually lost their capital ?

I recall they were marketed in such a way, that you had all of the upside of investing in the sharemarket, but with no risk, as your capital was gauranteed in 5...10 years time. (whatever the life of the particular fund was)

Yes, they would have looked attractive to a naive investor, but once you understood the mechanisim for obtaining the capital gaurantee (as explained by Macduffy) they didn't seem such a good deal.

As to weather any have suffered losses, I don't know. Is there a secondary market where you can trade your capital protected funds prior to maturity ?

Also, back when these were marketed, the portion of capital gaurantee funds they would have invested in, would have been in "triple A" type interest bearing investments, which in present circumstances could turn out to be worthless pieces of paper. In circumstances like that, it would come down to the credibility of the promoter of the fund to make up the difference I suppose.

[winner69]

In circumstances like that, it would come down to the credibility of the promoter of the fund to make up the difference I suppose.

Guy on the radio this morning saying that Macquaries should come out and say that no matter what happens they will give the punters their money back .... yeah right .... I can't see Macquaries as promoters of these Fortress things doing that no matter what the 'reputational risk' is

Strange isn't it ...... Bridgecorp et al do some dodgy things (loans etc) and fixed interest investors lose out and they are labled as evil conniving rip off bastards by some investors .... but the likes of Macquaries do some dodgy things (investments) and fixed interest investors lose out and at worst Macs will be described as just unlucky and the victims of circumstances beyond their control and their integrity remains intact

Yes you can buy these Fortress Notes on the NZDX - last sale 60 cents --- somebody offering to buy some at 20 cents in the $ -- seller wants 64

[kura]

W69, I'm not sure if these Notes were actually capital gauranteed (point me in the direction to look up Prospectus, and will have a detailed read)

I think we just got a bit off topic, as I thought these Notes were purely an interest play (theoretically safe) and not invested in sharemarket, so punters wouldn't have needed a capital gaurantee carrot.

[winner69]

W69, I'm not sure if these Notes were actually capital gauranteed (point me in the direction to look up Prospectus, and will have a detailed read)

I think we just got a bit off topic, as I thought these Notes were purely an interest play (theoretically safe) and not invested in sharemarket, so punters wouldn't have needed a capital gaurantee carrot.

Doesn't look like they were capital guaranteed

Prospectus here
http://www.macquarie.com/nz/acrobat/...prospectus.pdf

Latest investor update said if you managed to buy on market at 60 yield is in excess of 22% ---- but that is absed on interest at 4.5% (on the $1.00) above an assumed bank bill rate of 8.95%


See what happens eh

[kura]

Yes you can buy these Fortress Notes on the NZDX - last sale 60 cents --- somebody offering to buy some at 20 cents in the $ -- seller wants 64

Thats an interesting price difference, if NTA is 48 cents, then in the absence of a capital gaurantee, then you could expect it to trade round this level.

If it is capital gauranteed, then you could value it at face value of $1, then just discount it for however many years to maturity. (at some discount rate)

In any case, good luck to the guy offering 20 cents for something with a NTA of 48 cents.

[macduffy]

Given the nature of the assets I'd be very very wary of any valuation of the NTA!
The bid at 20c may turn out to be somewhere near the mark.

[Steve]

Doesn't look like they were capital guaranteed

If they were capital guaranteed, that would be a sure-fire reason to stay away from them...look at all those apartments that came with rental guarantees!

If you need the guarantee to make it work, then it most likely fails to stack up...