Macquarie Capital Products has introduced a new structured product aimed at self-managed superannuation fund (SMSF) members that will allow them to employ gearing for investments in international equities.
Macquarie reFleXion Select is a modified version of the existing reFleXion Trusts for use in the superannuation market.
Under the structure, SMSFs can contribute 40 per cent of an intended offshore equities investment and borrow the remaining 60 per cent of the initial outlay through a non-recourse loan that charges foreign rates of interest, currently ranging from 5.9 per cent to 7.85 per cent, on the geared amount.
"No interest is payable on the loan. It's capitalised up at maturity. So at no stage will the super fund ever have to pay anything more than the 40 per cent of equity it put in on day one," Macquarie Capital division director Jason King said.
"There are no margin calls, it's a loan that's fixed and we have no further claims against the investor" he explained.
ReFleXion Select then provides the SMSF with a choice of four underlying investment options covering BRIC (Brazil, Russia, India, and China) emerging markets, Japanese equities, European equities and commodities.
The minimum investment in the new structured product is $50,000 - $20,000 SMSF contribution plus a $30,000 loan. The term to maturity is five and a half years.
"Investors can pick one or all four of the investment options but there are minimums. So for a $50,000 investment within each fund you can allocate a minimum of $12,500 in each," King said.
Upon maturity SMSF members can either repay the loan and keep the underlying investment, or sell the investment to pay off the loan and keep any excess capital gain that has resulted.
ReFleXion Select is now available to investors both directly and through financial planners, and will remain open until the end of April.
Macquarie intends to release further series of the product on a six monthly basis periodically beginning in August 2008.
