Protected lending takes off with cautious investors

The popularity of protected lending products has risen since the events of September 11, indicating investors are still keen to invest but continue to be cautious, aMacquarie Financial ServicesGroup report has revealed.

Macquarie Financial Services marketing director Andrew Murray says a protected investment loan works by providing clients with up to 100 per cent of the amount invested. However if at the end of the loan term the value of some of the shares has dropped below its original value, then clients can just hand back the shares and this will repay their loan over the shares.

However, if the share values goes up, clients keep the profits. The proportion of the profits the client keeps depends on the loan they used but can be as much as 100 per cent.

Murray says a protected investment loan enables clients to benefit from the potential profit or gains of share investments without the clients losing their capital.

He says it is clear that investors are more cautious of late, with many looking for ways to take advantage of the current share market opportunities without putting their initial capital at risk.

The trend towards protected lending products has increased since the fall in the markets, according to Murray, and even though the markets are recovering, this trend does not seem to be weakening. He says now is the best time for investors to lock in the current low share prices, as they won’t lose their capital.

In keeping with market trends and in response to their client inquiries, Murray says Macquarie Financial Services has launched an education campaign on protecting lending products. He says the campaign will provide clients and their individual financial advisers with information needed to assess whether these types of investments suit them.

Macquarie offers two protected lending products, the Geared Equities Investment and the Shared Appreciation Loan with the minium investments at $50,000 and $25,000 respectively.