Savings Product Review: Packaged Income Notes

Wednesday 1st February 2006

What's it called and what sort of a savings product is it?
Packaged Income Notes or PINS. It's a capital protected income investment.

Who is the company behind it?
Sydney-based boutique manager Absolute Capital is company behind it. While it is small they are backed by one of their shareholders, Dutch bank ABN Amro which is huge.

Who is the target market?
PINS is aimed at the more conservative end of the fixed interest market because the principal is protected. However its interest rate is bound to whet the appetite of many people looking for income.

What return does it offer?
The headline target return is 9.25% paid quarterly. However it has this dinky bit that if the fund does really well the profits will be shared between Absolute and the investors. Under this arrangement there could be an additional payment at the end which could bring the annual return up to 10.95% pa.

What other products is it like or is it competing with?
Last last week's product this one is quite unique too. At the end of the day though it is likely to appeal to those who put money into finance companies.

Is it long term, short term or medium term?
The investment is for a fixed term of seven years. One of its attractions though is that you can get out early as it will be traded on the NZX debt market.

What is the unique selling point?
It has three main selling points (and a couple of smaller ones). The rate is likely to have appeal, as does the capital protection. The third point is what the manager calls the "rear ending" of the management fees. What that means is that Absolute take most of its fees at the end of the term rather than upfront or during its life span.

How strong a stomach do you need for it? (in other words, what's the risk profile?)
You wouldn't have sleepless nights over this one. You will get you capital back. You can get out of it, and hey - it's fixed interest.

What's the hitch?
It doesn't appear to have too many hitches.

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