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ASB warns investors

Rob Hosking

Wednesday 7th September 2005

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ASB Group Investments has issued a warning about some finance company debentures, saying investors do not know the degree of risk they are taking on.

"Investors need to speak to accredited advisers," says ASB Group Investments head Rob de Luca.

There has been a surge in popularity of such investments over recent years, and ASB says it has taken a look at the risk underlying some of those investments.

"Our research shows the average earnings from these sort of investments ranges between 15-40%. They're paying investors 9-10%.

"Now that says that in many cases the investors are not aware of the extent of the risk they are taking and they are not getting an adequate return for that risk.

"Investors put their money with finance companies, seduced by the phrase 'first ranking secured deposits' but in many cases their money is anything but safe,"

The research - which ASB is not releasing in full - is not a case of the company bagging the competition, says De Luca.

"There's about $8 billion in theses sorts of investments: retail funds is up about $20 billion. They're not a threat."

However, he says ASB is concerned that investors are going to get burned, and that will hurt the industry overall.

"We're very much saying: 'investor beware'. When you are looking to invest money use an accredited advisor who is going to ask those questions about risk. Find out what you are taking on and whether the return you're getting is adequate for the sort of risk which you would be running."

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