Managed Funds Navra Warrants

Limited details for Navra Warrants were presented tonight at the cocktail party. A quick look at the ABN Amro web site showed a link to the product. They contain more detail and are also quite funny they are drafts and contain little yellow notes for later corrections

For your reading pleasure

[links deleted]

 

These commisions were never mentioned in the presentation.

Commissions2 payable to NavraInvest
Upfront up to 2.20% of the Loan Amount
Trail upto 1.10 p.a. of the Loan Amount

2These commissions are payable by ABN AMRO out of its own funds and is not an additional cost to
a Holder of Navra Instalments

Then where do these commissions come from?

Cheers

 

As John Symonds was always saying ...

"fee, fee, fee".

If the product is designed to eliminate the possibility of a margin call with a put option attached to it, what is the bet they expect the market to go down even further?

 

I suspect from "borrowing fees" paid at application and reset. This area is not clear in those docs, but they are draft. User always pays somewhere !

 

Looks like the questions/corrections are made by ABN AMRO's lawyers, Allens Arthur Robinson (AAR)

Allens Arthur Robinson - A leading international law firm

 

Hi, the PDS for the ABN-Amro Unlisted Rolling Instalment Warrants is available from Navra Financial Services. I received mine early last week.

Terry

 

Hi Terry,

Can it be downloaded from the site?

Thanks,
artgul

 

I noticed that the PDS only mentions the retail fund. No words about the whole sale one....

Cheers,
artgul

 

my understanding is that the warrants are only available with the Retail fund so if you had units in the wholesale fund and want to use the warrants you would have to switch to the Retail fund

 

...Plus the standard 1.5375% MER (including RITC) and Administration costs of 0.3075% (including RITC).

Redrover, it doesn't say anything about a put option. An instalment is a leveraged product where you put down some of the payment now and the final payment at a later date. To cover the difference between now and later funds are borrowed, hence interest charged on the funds borrowed.

It looks like they've offered the Retail fund so they can offer a minimum app of $2,000 as opposed to the Wholesale fund which is a higher minimum app.

For the interest charged this can be any reasonable amount, GE cards think that 20% pa or so is ok to charge.

A 10% or 12% interest charged for an instalment warrant on a managed fund can be seen as reasonable.

More information on Managed Fund Instalments can be read here MFI - Managed Fund Instalments - Home

Hope this helps,

Dan

PS Before making an investment decision speak to you FPA registered Financial Planner.

 

artgul,
I was talking to Steve about my planning, and he had the PDS posted to me. Didn't look to see if it was downloadable!
Dan,
Steve was mentioning interest rate not much higher than the current margin loan rate.

Terry

 

After several emails to Navra I now have a paper PDS. It too refers to the unspeakable PDS still posted on ABN Web Site

(And no that is not a link to the evil version, just a public web site as noted in the paper PDS.)

It took a call to ABN to get interest rates and fees. Loan 8.5% , "fees" 2.9% on loan amount . According to the PDS, the borrowing fee (2.2%) is payable on application and on reset. Next reset is 30/6/2008 so that means 2.2% now and another in June. I have asked for confirmation from ABN on this but do not wait in hope. A total of 11.4% pa can be OK for the right product, and is similar to the Maq Bank offerings. Paying the borrowing fee twice would change this, perhaps just wait until end of June or July. (What's the hurry when you have already paid your margin call with cash )

I'm still pondering. Anyone gone further with these warrants ?

 

I was one of the first clients to migrate on Steve's advise.

I had to withdraw funds to settle on PPOR and given unit price drop this would have meant a margin call. So timing could not have been worse

I was in the Wholesale fund. Had to sell units and buy into Retail Fund and this cost me some $$$'s ( Difference between Wholesale Redemption unit price and Retail application price ) which means I have ended up with less units in the Retail fund.

They say the devil is in the detail and I am still getting my head around this !!!

I will post more after I have my meeting with Steve in a few weeks.

 

My curiosity got the better of me. Those docs are actually public as links to them are still published on ABN's page about Navra instalments in the (ABN AMRO Equity Structured Products and Warrants - Australia and New Zealand section unless you have the patience to find your way there the hard way - I think whoever planned their navigation is the same one responsible for approving which content gets published )

 

Sorry guys, cant find this fee in the PDS, can you direct me to the pages.

&

I've got % as 8.5% (from Steve) & 2.2% borrowing fee at reset date.

Is this 2.2% the put option?

 

Rambada,

Page 9, read the PDS before making an investment decision...
[link removed]

Cheers,

Dan

PS Before making an investment decision speak to your FPA registered Financial Planner.

 

Still waiting on ABN, and now on Navra for an answer if the "fees" is calculated pa (and adjusted for the remaining term to reset like the loan interest) or a flat fee on the loan at application and reset.

Does anyone know?


The link to the naughty PDS is back


[link removed]

 

Having been the first person to move across I am seeing that there are a lot of 'grey' areas still.

Would be great to clarify all details on this thread as they become 'known'.

 

Well, I wouldn't have any unknowns before committing many thousands of dollars in fees.

I'm surprised that for the commission NFS receive from people taking these warrants, it is not easier to get started. (And no, it's not all in the PDS before some guru says go read it).

A priced example would be good. eg

Say unit price $1.00 today (as if )
Reset date is 30/6/08
50% LVR
Interest rate is 8.5%
Fees are 2.9%

Warrant price = $0.50 + $0.xx interest + $0.xx fees
Loan = $xxx
Final payment = $xx

Don't need much information really.

 

As a finance vehicle, these warrants need clear understanding and as asked, an example would be very beneficial. In terms of fees & % rate, certainly clarification needs to be made. The fees for the Navra Fund are the same whether a margin loan or a warrant is used, so it’s the finance product that needs to be examined (outside of the decision on the Navra Fund itself).

Now my question is based on what is better – warrants or margin lending and these are the key factors for me. Don’t get me wrong, I am not anti-warrant – just want understanding (Mum says I never grew out of the ‘why’ stage!)


% rate and fees – ANZ Margin Lending 9.39% vs ABN Amro 10.7% (8.5% + 2.2% to the best of my knowledge) - what do I get for my extra 1.31%?

Put option – is this part of the 2.2% fee, as it is not clearly stated as such. And if you buy in now at 50% margin, will the market collapse that much more to prompt a margin call? To me that is a depression, and only the 4 main banks will remain standing (via Govt intervention). So is the put option relevant?

Extraordinary Event – PDS 2, Section 8.1 A market or corporate collapse will initiate an early reset date anyway (see query above)

Margin Call – Warrants indicate no margin call but is there a defacto margin call at each reset date? That is how I read PDS 2, section 2.3 in that at the reset date the loan ratio will revert to 50% LVR

Reset Date – this is annually in June but as asked, is there a 2.2% loan fee payable now, and in June 2008.

Distributions – as Steve commented on, any yield greater than 10 % should be reinvested as ungeared units to maintain 50% LVR – does this apply to warrants as well as Margin lending? I would think so.

Reinvestment – given the answer above is yes, can you buy extra units and ‘give’ them to ABN AMRO? This sounds an odd question but I believe this product is illiquid (PDS 1 Section 5 Key Risks). And as when a margin call occurs, you can’t run out & buy more units to satisfy the call – it’s a cash recourse only.

A bet each way – like fixing % rate on loans, is a split into both camps a viable concept?

These are relevant questions for me. If I manage my cashflow & LVR appropriately (maintain @ 50% LVR) then what is the benefit of paying 1.31% extra ($1310 per $100,000 of debt per annum) – doesn’t sound much when you think of it like that.

The non-recourse aspect is good SANF. The margin calls are reduced to annually (unless I’m corrected).

I'm asking these questions here but will be forwarding them to Navra for their perusal. So forum input is welcome & when I get a reply I'll post it.