New Zealand Government stock is guaranteed by the Government so is one of the most secure fixed interest investments. These issues are the largest in the domestic market and the most liquid (i.e. the easiest to buy and sell).
Local Authority Stock
Local Authority Stock is secured by a rating charge is more difficult to access as there are few issues available to retail investors now. This is due to changes in legislation that require local authorities to incur significant compliance costs to issue to the retail market.
Corporate bonds including bank-issued securities
A corporate bond is a loan to the corporate (issuer) which pays you as the investor a fixed rate of return, payable by quarterly or semi-annual interest coupon payments up until the maturity date when your principal is repaid. Corporate bonds include the issues by banks for senior and subordinated bonds, which trade mostly on the over-the-counter market. These often have a credit rating assigned by one of the global credit rating agencies. The advantage of investing in corporate bonds is the yield enhancement over government stock and most of the bonds are easily traded.
These include capital notes, capital bonds, convertible notes, redeemable preference shares and perpetual instruments.
Hybrid securities tend to offer investors a higher income stream and medium-to-high risk depending on the individual security. Many hybrids are unsecured and subordinated - ranking below senior debt but ahead of shareholder funds. These offer interest payments or imputed dividends at levels significantly above government stock and most are listed on the NZDX offering transparency and a degree of liquidity. Terms are often very different to conventional bonds with more choice by the issuer as to payment of coupons/dividends and at maturity some convert at the issuer's option into shares.
We recommend clients consult their Investment Adviser for specific details and whether the level of return is commensurate with the level of risk.
We prefer negotiable securities for fixed interest portfolios and only recommend debentures for investments where access to capital is not needed. However, debentures do provide a known income stream for amounts of $1,000 and up. We provide research and recommendations on selected debentures.
Beyond providing fixed interest investment alternatives, we also specialise in the building and management of fixed income portfolios offering a known stream of return, so your income needs can be met.
Our Fixed Interest desk, in conjunction with our Research team, publishes a range of research reports and recommendations on individual fixed interest products as well as model fixed interest portfolios.
If you are looking for surety of income and stable returns, or a dedicated income-focussed investment portfolio, your Craigs Investment Partners Adviser can assist you by recommending appropriate investments to suit your needs and risk profile.
Speak to one of our Investment Advisers today about the range of fixed interest investments which are currently available.