SMSFs particularly exposed to hybrids
The Australian Securities and Investments Commission (ASIC) chairman Greg Medcraft has singled out self-managed superannuation funds (SMSFs) as being particularly exposed to any failures with respect to hybrid securities.
In a speech in Western Australia yesterday, Medcraft pointed out that two-thirds of the 75,000 investors in hybrids were SMSFs.
“This is concerning if those investors are depending on regular payments from their hybrid investment or that their investment will be redeemed after a short period,” he said. “Generally, there is no guarantee that this will happen with a hybrid.”
Earlier in his speech, Medcraft said ASIC was focusing on the sale of hybrids for three key reasons - possible misleading conduct on the part of those who suggest hybrids were simply debt products, unwarranted comparison of hybrid returns to fixed income products or indexes, and “spruiking the returns of hybrids and the brand of the companies issuing them without being upfront about the risks involved.”
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