June 23, 2016
Are you looking to get regular income from your investments? If you are then there are options other than bank term deposits.
Hybrid securities traded on the Australian Stock Exchange can provide you with an attractive alternative and are well worth considering.
‘Hybrid Security’ is a term used to describe an investment vehicle that combines elements of debt and equity securities. They promise to pay a rate of return (fixed or floating) until a certain date and also have equity-like features that can mean they pay a higher rate of return than regular debt securities.
Assets with a higher level of risk will generally have a higher potential rate of return such as regular bonds or cash.
Hybrids have complex terms of issue and each investment will differ in terms of conditions, time frame and interests rates and this is why it is important that you get advice from appropriately skilled advisers. There are over 50 hybrids trading on the ASX so you really do need to take expert advice on the mix that is right for you.
Before suggesting hybrid investments to my clients I analyse the recommendations of Bell Potter Securities fixed interest team to make sure that I only offer the products that meet my exacting requirements so that they are suitable investments for my clients.
The notes are issued at $100.00 and recent issues from AMP, Macquarie Bank, CBA and Westpac are trading between $101.50 and $105. Between them, they have raised $4 Billion and they are paying about 5% above the bank bill rate which when you include the franking equates to about a 7% yield. There is good market liquidity so if you wish to buy or sell there are always buyers and sellers. For example, the new Westpac note has had turnover of over $20 Million since listing on 1 July this year.
If this type of investment interests you, then give me a call to discuss and de-mystify hybrids and lead you to a sound investment strategy.
I make regular visits to the Wide Bay area and I can meet with you personally to discuss hybrids and your investments.
Tim Weber started work on the Melbourne Stock Exchange as a trading operator after studying Economics and Law at University. He then joined A C Goode & Co as a private client adviser. Over the next decade he continued to work for brokers and as a financial planner. Tim holds a Diploma of Financial Markets from the ASIC and a Diploma of Financial Planning.