Where do long term expats in Bali invest their money? Land
and property is the answer for many. Putting one’s money
into a business is another. But for foreigners such investments
are not without risk so the wise ones either have solid assets
in their home countries or they invest in the offshore financial
markets via savings or pension plans or a lump sum invested
in stocks and bonds. The latter have been the traditional
mainstay of pensions and portfolios but that changed with
the long bear market of 2000 to 2003 when global stocks lost
half their value and bonds provided little comfort. Modern
portfolios now contain a much wider range of assets. Additionally,
new products have emerged that are not correlated with traditional
markets. Below are some of the latest offerings. Not all are
completely new but they are now pulling in considerable investment
money.
Hedge funds – choose your level of risk!
Hedge funds used to be the domain of the very rich. Now they
are available to retail investors. Caution must be exercised
however since different funds will have very different risk
profiles. For conservative investors a favourite is the Momentum
AllWeather Fund which has never had a losing year since launch
in 1995 and has returned an average of around 9% per annum.
If you are looking for more excitement there is a new Symphony
Alternative Alpha fund which has a target return of 20% pa
but with much higher volatility.
Guaranteed hedge funds
If you are averse to the thought of losing money then a guaranteed
fund may appeal to you. In return for leaving your money invested
for a number of years you are guaranteed to get back your
original investment as a minimum at the end of the term. One
of the most successful providers of such funds is the Man
group. Many of its hedge funds have returned an average of
15% pa over a number of years making the guarantee redundant.
The downside is that if the fund did fall you would have a
long time to wait to get your money back in full, by which
time its purchasing power will have diminished. Minimum investment
is US$50,000 although there is a very popular Australian Dollar
version with a minimum of only A$5,000.
Oil and energy
Fed up with the high cost of petrol and other products linked
to oil? Not everyone is a loser. The oil companies have made
record profits as countries panic to secure their supplies
and in face of insatiable demand from growing economies like
India and China. One fund, the Investec Global Energy Fund,
invests in mid-size oil companies and companies that service
the industry. Last year the fund made 53% and over three years
a staggering 202%. While the price of oil is subject to wild
fluctuations the long term trend has got to be upwards so
this is an asset to hold if you want to be on the winning
side!
Gold and precious metals
Countries that have traditionally kept US dollars as their
reserve currency have had their confidence in the greenback
weakened in recent years. Gold is looking increasingly attractive
as a substitute, particularly as oil prices surge. Platinum
is another metal whose supply is finite, yet demand for it
is unabated in the oil and computer industries. To invest
in these assets you do not need to go out and buy them physically.
You can invest via a mining fund or into a fund such as Aliquot
Precious Metals Portfolio that buys and stores them for you.
This fund invests in gold, silver and platinum.
Land banking in Canada
Linked very much to the fortunes of the oil industry are tar
sands in Alberta. With oil at current levels these tar sands
that hold vast quantities of oil are looking increasingly
viable. They will however need high levels of labour to exploit.
This in turn means there will be considerable urban expansion
in the region. One company has been buying large tracts of
potential development land on behalf of investors for around
20 years. Blocks of this land can be purchased for as little
as US$20,000 and are projected to return between 9% and 14%
per annum over the long term.
Making money out of existing investments
An ingenious product has been created by a company called
Foundations Capital. It allows you to assign an existing investment
to the company which it then uses as collateral to raise low-cost
loans to invest in a conservative range of funds managed by
a leading investment house. Unlike normal leveraging the loan
is raised in stages over an extended period and gains are
periodically locked in. By careful risk management the company
is able to project potential returns of 6% to 9% per annum.
Without any new investment money being added! Returns of course
are not guaranteed and losses are possible but a lot of work
has gone into the product to minimise risk. The fund is based
in the Isle of Man and securities are deposited for safekeeping
with solicitors. Apart from enhancing the return on a traditional
portfolio it is an excellent way to squeeze added returns
from old paid-up savings plans and such like that have some
time to go before maturity.
Other non-conventional products
Many other products now exist that offer from modest but sure
returns to high but risky returns. They include funds that
invest in student accommodation, ground rents, traded endowments,
property developments, commodity trading and more. The large
investor is now spoilt for choices.
But before you reach for your cheque book….
The above products are all capable of producing modest to
high returns but bear in mind that with high returns come
volatility and the risk of short term losses. Also I would
not advise investing in any of the foregoing products in isolation.
They can and should however be part of an overall strategy
tailored to your own medium and long term needs.
Colin Bloodworth is a senior adviser with Financial Partners
International. The opinions expressed are his own. If you
have any questions relating to personal finance you may contact
him at 021 520 8099 or colin.bloodworth@financial-partners.biz
