Did you know... bonds take a nosedive

Did you know.... Bonds take a nosedive

The old insurance bond is looking a bit sad and drab these days and in the wake of bold new performers in other sectors, it's a wonder they haven't been pen-sioned off altogether.

Did you know.... Bonds take a nosedive

The old insurance bond is looking a bit sad and drab these days and in the wake of bold new performers in other sectors, it's a wonder they haven't been pen-sioned off altogether.

Bonds haven't been doing so well since changes to the tax environment about three or four years ago. They've been in decline and have never been actively sold since, although it's fair to say they have never actually died.

AMP is a clear market leader, with almost $1.2 billion in bonds in the quarter ending September 1999. Mercantile Mutual takes the silver medal with $988 mil-lion, up on previous figures - largely as a result of a strategy Paul Resnik worked out for them. Resnik came up with a paper last year that said insurance bonds are better than unit trusts from a tax perspective.

ANZ comes in at number five with almost $565 million - although there's no fun-damental reason why they should be up with the big boys. It may simply be a function of holding their own in a declining market or perhaps a movement of new funds inflow.

It will be interesting to see whether the sector improves as interest rates rise and whether the new tax regime will make them attractive again.

Table:

Insurance Bonds - September 1999 ($millions)

Company Insurance Bonds

AMP 1,165

Mercantile Mutual 988

LendLease 715

Colonial 710

ANZ 565