Hindal is about to launch a managed fund offering a lowly correlated alternative investment class to the major asset classes in the form of purchasing and holding historic Australian currency.
The Hindal Australian Rare Coin and Banknote Fund will invest in domestic currency that was issued prior to 1966, when the decimal system was introduced.
Robert Jaggard, managing director of Jaggard’s, who will be responsible for the buying and selling conducted by the fund, said: “All the items in the fund will be un-circulated currency or the finest quality possible to get, and will include rare pieces as well. About a third will go into gold, a third will go into banknotes and a third will go into things like Holey Dollars and dumps.”
Research conducted by Hindal on the performance of domestic pre-decimal coins and banknotes over the decade spanning 1996 to 2006 showed the investment category delivered compound annual returns of 22.31 per cent for a five-year term and 15.34 per cent for a 10-year term. This compared favourably to the 15.4 per cent and 13.27 per cent returns produced by Australian equities for the same periods.
“Rare notes and coins as an investment return over a decade . . . has had a very strong trend rate of increase with an occasional flat period, and as far as I could see no dips,” independent chair of investment committee for the fund Don Stammer observed.
Hindal has targeted an annual return of at least 12 per cent for investors in the fund. The manager is not intending to issue any significant distributions, meaning investors will have to realise their gains mainly through the sale or redemption of units. The initial opportunity to do this will be after the fifth anniversary of investor’s allotment date.
As the minimum investment sum of $50,000 would suggest, Hindal is looking to attract allocations mainly from institutional investors and superannuation funds, but self-managed super funds (SMSFs) are also being targeted.
“One of the emerging trends in the market has been do-it-yourself super funds, and while a lot of people may have started [buying banknotes and coins] as personal investors, they have now moved their items into their self-managed super funds,” Hindal analyst Julian Reznik explained.
Hindal is looking to have the product included on some financial planning recommended lists and retail investors may also in the future be able to gain access to the fund via multi-manager offerings.
