Zurich-based financial services company Credit Suisse and Pimco, a US fund manager, have agreed to enter into a partnership to launch a principal protected yield fund in Australia, an innovative new structured product which offers investors exposure to a portfolio of potentially high-yielding investments in bond funds.
The principal protected yield fund offers 100% protection at maturity (four years) on capital invested, and a potentially enhanced return via embedded leverage. The product requires a minimum investment amount of A$20,000 and also carries the potential for attractive semi-annual income payments.
Furthermore, according to the group’s head of retail structured products for Credit Suisse’s fixed income business in Australia, Nick Buckland, the fund will also have between 100% to 200% exposure to the underlying bond fund investments, depending on performance. Pimco will manage the underlying bond fund investments.
Financial advisers are looking for ways to increase the returns from their clients’ defensive investments, without taking excessive risk, Mr Buckland said. The principal protected yield fund combines some leverage to potentially enhance returns, with principal protection to safeguard clients’ investments.
Providing internal leverage in the fund is likely to be particularly attractive to self-managed superannuation funds, which can’t otherwise borrow to invest, he added.