Financial Services

Alternative investments

Hybrid Securities
Hybrid securities are a relatively new class of security for Australian investors but have been used in global markets for many years. Within the broader hybrid security market there are a number of different types of securities including converting preference shares and converting notes, convertible notes, bond-like securities, income securities and miscellaneous floating rate notes.

Socially Responsible Investing
Socially responsible investing is the application of peoples’ values to their investments. It includes all the financial decision making processes that are a part of a prudent investment management approach, but it also includes the selection and management of investments based on ethical, moral, social or environmental concerns.

Farm Management Deposits
The Farm Management Deposits (FMD) Scheme was established in 1999 with the main objective of assisting primary producers to deal more effectively with fluctuations in their cashflow resulting from climate and market variations.

A primary producer is able to make a payment to a FMD and receive a tax deduction for the payment up to the amount of taxable primary production income for the year. Deposits must be held by the authorised deposit-taking institution (ADI) for a minimum of 12 months. If an individual withdraws a farm management deposit, the amount of the deduction previously allowed is included in the individual’s assessable income in the withdrawal tax.

Absolute return funds
Absolute return funds can improve overall portfolio diversification and lift returns when traditional asset classes are doing poorly. With global market valuations still above long-term price-to-earnings multiples, absolute return funds may be useful in reducing equity market risk. While absolute return funds are not yet mainstream, fund managers have capitalised on this greater acceptance by launching new types of funds into the market. Investors now have access to a range of more targeted absolute return strategies.

Structured Products
Structured products have become increasingly popular in the Australian retail market. This may be due to the ease with which 100% finance, deductible interest, topical investment themes and capital protection can be obtained. These alternative assets have some intricacies and risks associated that need to be considered and high quality intermediated financial advice is required.

Agribusiness
Agribusiness investments offer investors the opportunity to participate in primary production, through a managed investment scheme. Projects cover a wide range of agricultural sectors with many offering high levels of tax deductibility to reflect the cost of establishing and maintaining these investments.

Agribusiness investments are best suited to investors seeking greater diversification, attractive long-term returns and tax efficiency. Compared with returns from shares and property the expected returns from some of the longer-term projects are quite attractive. Importantly the risks involved with these projects are very different from typical investment risks and this enhances portfolio diversification.