Macquarie Specialist Investments (MSI) has launched a new investment facility that allows wholesale investors to swap participation in future share price growth for fixed income yield.
MSI head of distribution, Ferdi Kayakesen, said their advisers and clients said the market was hungry for yield as the Australian market had gone sideways since the Global Financial Crisis (GFC).
The newly launched Macquarie Torque Facility allows Australian wholesale investors to customise their piece exposure to Australian Securities Exchange (ASX) quoted shares, while owning the share directly.
The facility allows Macquarie to gain the potential capital growth of the shares in exchange for a fixed coupons, dividends, and franking credits for investors. The facility also allows investors to manage their downside price risk at maturity through knock-out put options or vanilla put options.
Kayakesen said the facility would suit investors who were seeking yield than they would receive in a term deposit or a government bond.
He said MSI used this base along with the fact that the market was going sideways where clients had big stock holdings to create Torque.
He said it would be most suited to clients who had existing blue chip in the ASX50, were happy to hold stocks for the long-term, and did not think the stock was running anywhere too hard in the short-term.
“If they give a $1 worth of stocks and protect that up to 80 per cent and they would not have any upside in the stock. So, by carrying a risk of 20 per cent in return they would get all dividend and franking and in addition to that there is basically a contract entered with Macquarie by the swap arrangement and they would get an additional coupon paid out to them,” he said.
“All of a sudden a stock returning four or five per cent with franking, with this type offer you get 10, 11, or 12 per cent depending on the structure put in place.”
Kayakesen noted that advisers needed to be derivative accredited and for their dealership to allow them to deal with derivatives as a prerequisite to offering the facility to clients.
