Commonwealth Bank seeks growth through structured investment solutions launch
28 May 2008
The Commonwealth Bank of Australia today announces a strategic move into structured investments with the launch of a new generation of products that target individual investors and Self Managed Super Funds (SMSFs).
The new product suite follows a substantial investment by the Bank in developing innovative, world-class investment options and a significant IT spend to ensure clients receive superior service.
The two new products, Options and Lending ("Opals") and Capital Series Multi Select are market leading investments that satisfy customer demand and incorporate the recent changes made to legislation.
Suzanne Salter, Head of Structured Investments at the Commonwealth Bank, said, "Following the market correction and subsequent increase in margin calls, investors require innovative products providing not only the peace of mind that capital protection brings in times of volatility, but also the potential for strong growth and returns. We are excited to be launching these new products at a time when we believe they will be of maximum benefit to investors".
Opals is a unique investment that is available to both individuals and SMSFs. It provides greater flexibility than the traditional protected loan and instalment warrant structure and provides investors with two new choices on a per transaction basis:
- maturity dates are no longer restricted to fixed round-year terms.
- gearing levels can be defined by the investor.
"Opals allows individuals to create wealth with up to 100 per cent borrowed funds and provides an opportunity for SMSFs to take advantage of new borrowing rules. The after tax benefit for SMSFs is attractive because of the excess franking credits generated as a result of the difference between the SMSF tax rate of 15% and the company tax rate of 30 per cent" said Salter.
Ruth Stringer, partner at legal firm Blake Dawson – who has acted for the Bank on Opals – said, "Superannuation legislation was amended last year to allow trustees of superannuation funds, including SMSFs, to borrow on a limited recourse basis, subject to various specific conditions. The Opals loan terms have been drafted so as to reflect those conditions so that the borrowing is within the parameters allowed by the superannuation legislation."
Mark Causer, Senior Financial Advisor at Commonwealth Private said, "This is an exciting opportunity for clients who have been looking for a solution with the potential to fast track the growth of their SMSF assets. The ability to gear into the Australian share market is an attractive proposition from a growth and income perspective."
Multi Select, the latest Capital Series offering, also provides a unique opportunity enabling investors to select from a menu of three investment strategies which seek to provide capital growth over a three and a half year term:
Best of Asia – exposure to a basket of indices across the Asia Pacific region, including China, Korea, Taiwan and Australia.
Emerging Markets Next 11 – exposure to the performances of 11 stock markets that make up the next group of emerging countries aft the BRIC economies.
Soft Commodities – .indexed exposure to the performance of agricultural commodities including Chicago and Kansas wheat, corn, soy beans, coffee, sugar, cocoa and cotton.
"Demand for the Capital Series is always high and we are expecting even greater interest in Multi Select which allows investors to borrow up to one hundred per cent on their Multi Select investment via the Capital Investment Loan" said Salter.
As well as providing exposure to emerging markets and new asset classes, Multi Select is an investment that is held in Australian dollars and is therefore not exposed to currency risk. Multi Select is an eligible investment for SMSFs and provides investors with 100 per cent capital protection, if held until maturity, and exposure to resilient emerging market economies and new asset classes.
Recent changes by the Australian Taxation Office to Deferred Purchase Agreements (DPAs) and the Government’s decision to change the tax deductibility benchmark have shifted the focus for many individuals and SMSFs on their investment portfolios. Both Opals and Multi Select enable investors to take advantage of new investment opportunities amid a changing legislative framework.
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