RBS Australia will list the first instalments over managed funds on the Australian Securities Exchange (ASX) within the next two to three weeks.
“RBS has been an issuer of instalments for over 10 years and in the past we’ve always issued instalments over shares, but there’s still a lot of retail money going into managed funds,” RBS director Liz Tian told InvestorDaily.
“The difference between this type of loan and, say, a margin loan, is that it’s a non-recourse loan so it’s legislated and allows self-managed superannuation money to be used in this type of loan facility to gear.”
The fund-linked instalments investors will be able to access include the Magellan Global Fund, Australian Unity Investments Platypus Australian Equities Trust, Premium China Fund, Vanguard Australian Shares Index Fund and Vanguard International Shares Index Fund.
Fund-linked instalments provide long-term geared exposure to managed funds, receiving many of the benefits of holding units in a managed fund, including exposure to unit price movements, distributions and franking credits.
RBS is currently finalising the product disclosure statement (PDS), but once launched, its instalments over managed funds will be readily available to investors as easily as buying a share.
Managed funds are traditionally accessed through a PDS.
The ease of buying and selling on the ASX would attract investors to instalments over managed funds, in addition to the intra-day liquidity, Tian said.
“We think there’ll be demand for this because this is one of the only ways investors can gear super money with an instalment product,” she said.
The local bourse had been working towards quoting active managed funds this year, but was beaten to the punch, she said.
“We’ve put this product together with the fund manager partners and [off] feedback from clients on funds that have been popular, so we’re doing an instalment over those particular managed funds,” she said.
“If you look at super money, typically it’s held in cash, shares and property. What has been very popular is to gear in super because of all the franking credits you generate.”
