Macquarie Equity Markets has released a second series of ALPS securities, offering an introductory income yield of 12 per cent, with a capital guarantee over the six and a half year term of the listed securities.
The performance of ALPS 2 is based on a reference portfolio of 80 of Australia’s 150 largest stocks. Strong performance by these shares will see the income yield increase by 1 per cent each year, potentially reaching 18 per cent in the final half year of the investment.
However, if just seven of the stocks in the portfolio fall by more than 45 per cent after the first six months, where a fixed 6 per cent yield applies, then the yield will fall to zero for the remainder of the term.
Investors will, however, still receive the 6 per cent return from the first six months, and will get back their initial investment.
ALPS 2 will be listed on the Australian Stock Exchange and Macquarie has promised to make a market for those investors wanting to cash out early, although the capital guarantee will not apply to those who don’t stay the course.
Macquarie Equity Markets executive director, Jeff Weeden, said ALPS 2 might suit investors who relied on income, but wanted better returns than those available from term deposits or bonds.
“Because this is a medium to long term investment, it can also work as part of a self managed superannuation fund,” Weeden said.
