Friday, May 30, 2014

Man 3 Eclipse Update

Back in 2008 I invested in a capital guaranteed managed futures fund called Man 3 Eclipse. This didn't turn out to be a great investment but it wasn't that disastrous either. However, other investors it seems have not been impressed by the fund's underperformance and have redeemed their shares. As the fund got smaller, late last year the directors decided to stop investing in active investment strategies and switch to 100% deposits in Australian Dollars. The fund was issued for a fixed period  maturing on 29 April 2016. A feature of the fund was a ratchet that locked in profits under some conditions. Currently the value at maturity is guaranteed to be at least $1.0554 for every dollar invested. The actual net asset value per share is $1.0414.If we assume that the fund will earn 2% per annum from now on then the value at maturity will be about $1.08. But my understanding is that if you redeem shares early then you only get $1. So this is a guaranteed 4% rate of return per year assuming they can earn 2%. The main negative possibility is that fees chew up the interest yield. If they do then we still get back at least $1.0554. Based on that I will keep my money in the fund. It's only $8,000 anyway...

So far, my investment in the Winton Global Alpha fund is much more successful. It's up about 5% since I invested.


Anonymous said...

Assuming that the fund gets a 2% return probably won't actually improve the final 'capital guaranteed' payment amount. The capital guaranteed amount for such funds is usually due to a sizeable fraction of the original total fund having been invested in a fixed term bank bond or similar, that will provide the amount needed to 'guarantee' the original $1 by the maturity date. The balance of the fund was what was acutually invested (after deducting up-front fees etc.). If the unit price has dropped below the 'lock in' amount then future returns (such as 2% fixed interest) on the investment won't increase the 'locked in' amount, so the final 'capital guaranteed' amount may not change by 2016.

ps. The Macquarie Equinox fund I invested is in a similar position and just wound up (they decided to close the fund completely and pay out the capital guaranteed amount to all remaining investors, rather than require investors to request their money at the 'maturity date'). I should get a payment for the guaranteed amount (minus the $50K capital amount I borrowed from Macquarie finance to invest) at the end of June. Gearing into this investment WAS a disaster - will get a miniscule payout (~$1,500) after paying a high fixed interest amount of the $50K loan each year... Only Macquarie Bank made any money out of this (no surprise there I suppose!).

mOOm said...

You may be right that the interest they'll earn won't increase the locked in amount. So then taking the money now will lose 5% compared to waiting as I'd get $1 back now vs. $1.05 in 2016? Maybe if I wait they will decide to close up as well and pay out to the remaining investors the "locked in" amount. I can't really be bothered given other things to do to look through the original documentation and try to work it out given we are talking about 5% of $8000.