About Good Returns  |  Advertise  |  Contact Us  |  Terms & Conditions  |  RSS Feeds Other Sites:   tmmonline.nz  |   landlords.co.nz
Last Article Uploaded: Thursday, November 14th, 11:45PM
rss
Current Special Report

Riding the Global Credit Crunch and Commodities Boom

Monday, February 11th 2008, 4:32PM
New Zealand investors felt the global effects of the credit crunch and commodities boom in 2007. It looks as though these two trends will continue to dominate financial headlines this year. By Michael Coote.

Credit markets crunched
The credit crunch that set in from mid 2007 owes its origin to sub-prime mortgages offered to US borrowers who failed to meet standard bank lending criteria. Soaring default rates on these non-prime mortgages have fed through into so-called 'structured products' that were mass manufactured to securitize those mortgages: collateralized debt obligations (CDOs), collateralized loan obligations (CLOs), bank 'conduits' and special investment vehicles (SIVs).

Structured products were sold worldwide, exporting US sub-prime mortgage default risk to foreign investors. The sub-prime debacle has since imposed severe and continuing devaluation strains on these exotic, illiquid kinds of fixed interest securities.

Knock-on effects have forced banks to raise loan interest rates and tighten lending criteria, triggering a credit crunch that is expected to persist for an extended period. One result has been an additional increase to already high residential mortgage interest rates in New Zealand. However, not all is doom and gloom for fixed interest investments.

The TOWER Extended Markets Fund – Asset allocation: fixed interest
This fund offers an opportunity to benefit from higher bond yield spreads caused by the credit crunch. It invests in emerging market sovereign debt and US high-yield corporate bonds (but not in structured products). After dipping briefly during the initial shock , fund performance has since weathered the onset of the crunch well.

The fund is actively managed by PIMCO, one of the world's largest bond managers, whose expertise in fixed interest analysis enables it to pick-and-choose skillfully from the current buyers' market for good quality higher-yielding bonds. Its assets are traded on open, liquid exchanges and marked to market (valued off actual daily trading prices). TOWER Extended Markets Fund cumulative monthly performance (gross) through the credit crunch period.


Commodities a-booming
News media are filled with stories about the global commodity bull market. Getting most attention at present are oil, petrol, gold, and agricultural commodities. A weak US dollar is boosting prices on top of relentless increase in world demand for energy, metals, and agricultural commodities. The agricultural commodity boom is underpinned by rising demand from China, India and other emerging markets for imported food, the negative effects of climate change on growing conditions, and conversion of grains and sugar into biofuels to help curb greenhouse gas emissions. Commodities are receiving standard inclusion as an asset class in their own right within prudently diversified investment portfolios. For example, the New Zealand Superannuation Fund recently confirmed a 5% strategic asset allocation to commodities.

The Tower Global Commodity Fund – Asset allocation: alternative investments
This fund represents a straightforward way for New Zealand investors to diversify their portfolios into the commodity asset class. It includes the 19 most important commodities (based on world production value (US dollars) and future market liquidity). The table below shows these commodities classified by sectors.

The Tower Extended Markets Fund and the Tower Global Commodity Fund are portfolio investment entities designed for pooling individuals' investments on wrap platforms and custodial services. Both funds are accessible through New Zealand's two largest wrap providers. For further information on these funds or to obtain an investment statement contact Michael Coote at (09) 302 1068 or michael.coote@tower.co.nz, or visit www.tower.co.nz

« Absolute return funds expand with Kauri Notes Series IIThe Best of Both Worlds »

Special Offers

Commenting is closed

 

print

Printable version  

print

Email to a friend
Subscribe Now

Mortgage Rates Newsletter

Daily Weekly

Previous Special Reports

MORE NEWS»

News Bites
Most Commented On
Mortgage Rates Table

Full Rates Table | Compare Rates

Lender Flt 1yr 2yr 3yr
ANZ 5.19 4.05 3.95 4.49
ANZ Special - 3.55 3.45 3.99
ASB Bank 5.20 4.05 3.95 4.39
ASB Bank Special - 3.55 3.45 3.89
BNZ - Classic - 3.55 3.45 3.99
BNZ - Mortgage One 5.90 - - -
BNZ - Rapid Repay 5.35 - - -
BNZ - Std, FlyBuys 5.30 4.45 4.35 4.55
BNZ - TotalMoney 5.30 - - -
China Construction Bank 5.50 4.70 4.80 4.95
China Construction Bank Special - 3.19 3.19 3.19
Lender Flt 1yr 2yr 3yr
Credit Union Auckland 5.95 - - -
Credit Union Baywide 6.15 4.95 4.95 -
Credit Union North 6.45 - - -
Credit Union South 6.45 - - -
Finance Direct - - - -
First Credit Union 5.85 3.99 4.49 -
Heartland 6.70 7.00 7.25 7.85
Heartland Bank - Online - - - -
Heretaunga Building Society 5.75 4.80 4.95 -
HSBC Premier 5.24 3.35 3.35 3.35
HSBC Premier LVR > 80% - - - -
Lender Flt 1yr 2yr 3yr
HSBC Special - - - -
ICBC 5.15 3.18 3.18 3.20
Kainga Ora 5.18 4.04 3.95 4.39
Kiwibank 5.80 4.30 4.20 4.64
Kiwibank - Capped - - - -
Kiwibank - Offset 5.15 - - -
Kiwibank Special - 3.55 3.45 3.89
Liberty 5.69 - - -
Napier Building Society - - - -
Nelson Building Society 5.70 4.25 4.15 -
Pepper Money Near Prime 5.64 - 5.44 5.44
Lender Flt 1yr 2yr 3yr
Pepper Money Prime - - - -
Pepper Money Specialist 7.59 - 7.39 7.39
Resimac 4.50 4.86 3.89 3.94
RESIMAC Special - - - -
SBS Bank 5.29 4.85 5.05 5.49
SBS Bank Special - ▼3.55 3.39 3.89
Sovereign 5.30 4.15 4.29 4.55
Sovereign Special - 3.65 3.75 4.05
The Co-operative Bank - Owner Occ 5.15 3.49 3.59 3.89
The Co-operative Bank - Standard 5.15 3.99 4.09 4.39
TSB Bank 6.09 4.35 4.25 4.69
Lender Flt 1yr 2yr 3yr
TSB Special 5.29 3.55 3.45 3.89
Wairarapa Building Society 5.70 4.85 4.99 -
Westpac 5.34 4.15 4.09 4.49
Westpac - Offset 5.34 - - -
Westpac Special - 3.55 3.45 3.99
Median 5.35 4.04 4.02 4.39

Last updated: 11 November 2019 4:01pm

About Us  |  Advertise  |  Contact Us  |  Terms & Conditions  |  Privacy Policy  |  RSS Feeds  |  Letters  |  Archive  |  Toolbox
 
Site by Web Developer and eyelovedesign.com