6th Augusta Property Syndicate

[gonk]

I said as if they are assured.

You are splitting hairs.

 

[ClubMan]

There is no justification for a company to show projected funds of €97K (based on €50k) and returns of 14.7% compound on their website, such marketing is dubious and should not be carried out unless such returns are almost assured.

I totally agree. This sort of projected return is totally misleading and many people will read it as if it was assured/guaranteed. If such figures are based on anything and not just plucked out of the air then they're probably based on past performance and we all know how irrelevant that is to future returns.

 

[South]

You are splitting hairs.

You are missing the point.

They are free to talk about how they manage the fund, choose properties, reduce costs etc...but what is the point is basing so-called projected returns on a ridiculous figure of 14.7% if not to entice customers, nonsense.

 

[gonk]

I totally agree. This sort of projected return is totally misleading.

Unless you can support this allegation by reference to misleading information in the advertisements or brochure, you are yourself being totally misleading in making it.

many people will read it as if it was assured/guaranteed.

If people choose to ignore the clear statements in the brochure that returns are not guaranteed and that in the worst case the entire investment could be lost, that's their own problem.

what is the point is basing so-called projected returns on a ridiculous figure of 14.7%.

Returns of this figure and higher are perfectly achievable for this class of investment, i.e. geared property funds. The downside is the gearing introduces greater risk of losing money if market conditions are unfavourable, but this is also clearly pointed out in the brochure.

 

[South]

Why not show returns based on a projected return of -14.7% as well?

 

[ClubMan]

Unless you can support this allegation by reference to misleading information in the advertisements or brochure, you are yourself being totally misleading in making it.

Projected returns are by their nature misleading because they are totally speculative.

 

[gonk]

Why not show returns based on a projected return of -14.7% as well?

The brochure includes this statement at the beginning of an extensive section on risk:

"As with every leveraged property investment, there are risks involved and it is possible that returns could fall short of those illustrated or in fact – in a worst case scenario – may be negative."

How you and Clubman can get from that to the view that prospective investors could reasonably take the brochure to say that the projected returns are in any sense "assured" or "guaranteed" is utterly beyond me.

Projected returns are by their nature misleading because they are totally speculative.

How can anyone decide what to invest in without making some judgement as to the possible future returns? The assumptions on which the projected returns are based are set out in detail in the brochure. Investors can form their own judgement as to how realistic they are. To say they are "totally speculative" is, however, once again factually incorrect.

 

[South]

I am not going to get involved in a quoting match here.

You attributed an accurate quote by Clubman to me above, but I do not mind because I believe his point was quite correct.

Ask yourself, if the company expects a 14.7% return on investment, why does it not borrow the funds (at 4%) and invest the lot and keep the profit for itself.

 

[gonk]

I am not going to get involved in a quoting match here..

Presumably this is because there is nothing in the brochure which supports your assertions.

Ask yourself, if the company expects a 14.7% return on investment, why does it not borrow the funds (at 4%) and invest the lot and keep the profit for itself.

That is in fact how the investment is structured. They are borrowing 80% of the property costs. The remaining 20% is being raised from investors. What you're asking is why don't they borrow 100% of the property costs. Few if any banks would lend at that kind of LTV ratio on commercial property. As an an actuary yourself, it's hard to believe you're not being disingenuous in even putting the question.

 

[South]

No, it is because there is nothing of note in any of your posts.

Why don't they raise the 20% from friends & family if this return is so good!!!

 

[gonk]

Why don't they raise the 20% from friends & family if this return is so good!!!

Now you're just being daft. This is the 6th syndicate these guys have put together. They're raising €20m in investment for this one alone.

They'd need a lot of very wealthy friends & family to raise that much cash.

You either haven't a clue about the rationale behind creating syndicates to invest in commercial property which otherwise would be beyond the reach of individual investors, or you understand perfectly well and you're again being deliberately disingenuous.

 

[South]

I know that the Financial Reulator does not allow insurance companies to project returns from investment linked insurance policies on anything higher than 6% (realistic) and 8% (optimistic).

These guys are on a different planet.

 

[gonk]

I know that the Financial Reulator does not allow insurance companies to project returns from investment linked insurance policies on anything higher than 6% (realistic) and 8% (optimistic).

You are just posting one non sequitur after another and avoiding directly addressing any of the points I have raised in relation to your earlier comments.

This is yet another. The Augusta fund is not an investment linked insurance policy - you are not comparing like with like. This is a geared investment in which returns on the order of those projected are perfectly possible - likewise, as a result of the gearing, high losses are possible.

 

[South]

Gonk, I have no vested interest here, there is no rational argument as to why a geared fund will outperform a non-geared fund.

Risk carries a price, the expected return is still the same - no free lunches out there unfortunately!

 

[ClubMan]

To say they are "totally speculative" is, however, once again factually incorrect.

No - it is factually correct (if you'll pardon that tautology). Nobody can predict the future and the returns are not guaranteed so the figures quoted are meaningless.

 

[gonk]

No - it is factually correct (if you'll pardon that tautology). Nobody can predict the future and the returns are not guaranteed so the figures quoted are meaningless.

Nobody can predict the future with certainty, but it is reasonable to give an informed opinion as to one's view on the likely or reasonably possible range of returns from an investment. Augusta provide full detail on the assumptions they have made to reach their projected returns figures. Investors can judge for themselves whether those assumptions stack up.

If you take your comment to its logical conclusion, then it is impossible to choose between any forms of investment. Even a deposit account is uncertain because you can't know in advance what the real rate of return will be after inflation. The reality is people and businesses take investment decisions every day based on incomplete information and uncertain outcomes. You and South are going way over the top in your attacks on this product and making claims that are not borne out by the facts.

Specifically, I challenge either of you to justify your assertions that anyone could believe the projected returns are "assured" or "guaranteed" when the product brochure prominently warns to the contrary.

there is no rational argument as to why a geared fund will outperform a non-geared fund.

This is nonsense. All other things being equal, provided the rate of return is sufficiently greater than the cost of borrowing, gearing an investment will produce higher returns. Of course, if the investment performs poorly, the geared investment will produce much worse returns. This is inherent in all geared investment and is not unique to this product. It is also a risk that is fully disclosed in the product brochure.

 

[South]

Nobody can predict the future with certainty, but it is reasonable to give an informed opinion as to one's view on the likely or reasonably possible range of returns from an investment. Augusta provide full detail on the assumptions they have made to reach their projected returns figures. Investors can judge for themselves whether those assumptions stack up.



This is nonsense. All other things being equal, provided the rate of return is sufficiently greater than the cost of borrowing, gearing an investment will produce higher returns. Of course, if the investment performs poorly, the geared investment will produce much worse returns. This is inherent in all geared investment and is not unique to this product. It is also a risk that is fully disclosed in the product brochure.

Showing such returns and calling them "projected" is just marketing spiel.

So I can set-up a hedge fund and show projected returns based on a load of assumptions that nobody knows will come through or not, and you would respect that?

Do you think investors accept lower rates of return because they want them?

The expected return on a geared and ungeared investment is equal, the only difference is that the probability distribution of a geared investment will have much much longer tails - the tails represent the more frequent extreme positive and negative results on such investments.

 

[gonk]

Showing such returns and calling them "projected" is just tacky marketing.

Will you please address the point and tell me how anyone could believe the projected returns are "assured" or "guaranteed" when the product brochure prominently warns that they are not?

 

[ClubMan]

Nobody can predict the future with certainty, but it is reasonable to give an informed opinion as to one's view on the likely or reasonably possible range of returns from an investment. Augusta provide full detail on the assumptions they have made to reach their projected returns figures.

But they only quote one figure and not a range of figures in the summary - +14.7%.

 

[South]

My point is that the brochure shows an unrealistic return.

It only shows one return, and most individuals are protected by The Financial Regulator limiting illustrated returns to realistic levels.

Augusta does not seem to be impacted by such regulation.

Who is Augusta regulated by?