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Mason Stevens Equity Insulator Instalments

Fund Category Miscellaneous
Minimum Initial Investment $1,000^
Expected Close Date Ongoing
Mason Stevens Group

Mason Stevens Equity Insulator Instalments offer exposure to ASX securities through a limited recourse loan and with 110% portfolio protection throughout the investment term. Investors can benefit from exposure to the positive performing shares, with capital protection against any negative performing shares - keeping the winners and handing back the losers. During the 3 year investment term, investors will not be subjected to any margin calls and can walk away at any time without any further cash payment#.

Key benefits

  • Leveraged exposure to a portfolio with small initial outlay.
  • Uncapped growth - potential share market growth opportunities without any caps.
  • Enhanced yield - leveraged exposure may offer more dividends than may be availableand franking credits.
  • Tax effectiveness - potential tax deduction for the interest paid on the Loan.
  • Self Managed Super Fund eligible - limited recourse loan enables SMSFs to invest where it suits their overall investment strategy.

^The minimum dollar amount of Equity Insulator Instalments that may be applied for per Series is $1,000.

How it works - 20 Leaders Strategy through the Equity Insulator 

The Equity Insulator 20 Leaders Strategy involves purchasing an equally weighted portfolio of 20 ASX-listed instalment warrants for each of the underlying shares in the strategy through a limited recourse loan from UBS. Investors can borrow 110% of the portfolio’s value which will be used to purchase the portfolio, and contribute to the first year’s interest. Each instalment warrant would be capital protected at 110% during the investment term.

The only capital outlay is to prepay each year’s interest in advance; in the first year this will help purchase portfolio protection for all three years of the investment term. Investors will be invited to prepay the interest amount for the next interest period on each Annual Rollover Date which may allow the investor to potentially claim a tax deduction in each of those years. Please refer to the Product Disclosure Statement and the Supplementary Product Disclosure Statement for indicative interest and payment rates for the first year. The Interest Rate used to calculate the Interest Amount due on an Annual Rollover Date will be significantly different to the indicative Interest Rate on the Strike Date as unlike the Interest Rate for the First Interest Period it will not include a capital protection component.

Throughout the investment term, you will receive all available Cash Ordinary Dividends paid on the relevant underlying security and receive the benefit of franking credits.

The Equity Insulator offers daily liquidity as it is listed on the ASX, so investors can walk away at any time without any further cash payment#.

Keep the winners, hand back the losers

The chart below shows the performance of the ASX 20 from the period June 2007 to June 2010.

If in June 2007 you had invested $100,000 across an equally weighted portfolio of the ASX 20 directly, this portfolio would have been worth $73,419 by June 2010, equating to a loss of $26,581.

If you had protected each and every share individually at 110% over the same period your portfolio would have been worth $110,055. By harnessing a theory called ‘dispersion of returns’, this portfolio’s return captures the one positively performing security whilst protecting you from the downside of 19 negative performing securities. Effectively you’ve kept the winners and handed back the losers.

Note: Both scenarios are before any buying, holding, funding or protection costs of the securities (which may be significant) and ignore any dividends and franking credits

Equity Insulator may suit investors who:

  • Are comfortable borrowing to invest and can service interest cost requirements.
  • Seek potential tax benefit while investing.
  • Keen to access uncapped growth but want to protect their capital.

The Mason Stevens Equity Insulator Instalments is a joint initiative between Mason Stevens (Arranger) and UBS AG, Australia Branch (Issuer).

About Mason Stevens

Mason Stevens is an investment management firm that is committed to providing a transparent and complete investment management solution across equities and other asset classes to its clients. Mason Stevens and 2020 DIRECTINVEST are part of The Mason Stevens Group.

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2020 DIRECTINVEST will rebate 100% of the 2.0% entry fee on investments in the Mason Stevens Equity Insulator Instalment by waiving the Borrow Fee. 2020 will also waive the 0.5% pa annual rollover fee in the Equity Insulator.

Disclaimers and other important information

^The minimum dollar amount of Equity Insulator Instalments that may be applied for per Series is $1,000.

#Prepaid interest on an Investment Loan will not be refunded.

Important information

Leverage increases downside risk: Because of the leverage in Equity Insulator Instalments, for the same dollar investment, you have greater exposure to decreases in the Underlying Securities (as you do for increases). Information provided on this page is not tax advice. We recommend you seek personalised advice from a tax specialist.


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