Funds Focus

Managed Investment Schemes (MIS) have traditionally offered two core benefits, diversification away from share market linked investments and a substantial tax deduction.

The recent demise of Great Southern and Timbercorp is concerning to prospective MIS investors but it is important to distinguish their poorly conceived business model of inferior product and high company debt levels contributed to their downfall, rather than a reflection of the MIS industry per se.

On a positive note

Capital Protection – Reading between the lines

Increased volatility is bad news for CPPI / Threshold Management

2008 saw many investors in CPPI products cash locked with no hope of getting back more than they had originally invested at the end of the investment. We consider why CPPI products are disadvantaged in a world of increasing volatility.

Investors using CPPI products such as Perpetual’s PPI Series have recently found themselves cash locked. ie in a falling market, once the

Reading between the lines

Falling interest rates, increased volatility and uncertainty in the markets has resulted in a rush to offer investors capital protected products.

There are many variations on the theme but most products provide similar features:

1. A guarantee of the return of all (or percentage) of your capital at a fixed date in the future
2. Fixed periods of time, typically 5-7 years
3. 100% investment loans
4. A return linked to an index or to a high