# 6th Augusta Property Syndicate



## Nomansland (18 Jul 2007)

Hi,
Was reading about the afforementioned on the buisness section of the Sunday Tribune and decided to check it out some more. At the moment I am dabbling with the idea of investing in it, the main reason being the high projected rental yields of 7.5% p.a. (I realise that the company will offset some of the rental payments against the interest on the bank loan). Costs for me seem to be an initial 3% and 0.75% per anum. I would be investing the minimum of 50K. Also the only investments I have at the moment are 100% stock market orientated so I would like some property exposure. If I am to invest in property I rekon that commercical property in Germany might be reasonably sound. One issue I have with it is the description of it as a low to medium risk investment. Surely any leveraged product should be considered medium to high risk. For anyone who is interested in having a look here is the link.
[broken link removed]

One other question, I am fairly green when it comes to investing and I have never actually sat down with a financical advisor until today. I looked up a list of independent financical advisors on the financical regulators web site and got in contact with a mortgage/pension and investment broker for my area. I got him to have a look over the afforementioned product and he said it was reasonably good investment for someone who had a medium to high risk investment strategy. He also showed me some other similar products which friends first and a few others are offering. When I asked him how much I owed for his services he said that the way they operated was that I could invest in whichever product I chose through them (including the Augusta syndicate) by simply paying him the initial 3% outlay instead of the nominee company.
My question is does this constitute independent financical advice??


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## extopia (18 Jul 2007)

Maybe. But that doesn't mean it's good advice. Beware of investment vehicles bearing high commissions and dodgy marketing terms like "syndicate".


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## South (18 Jul 2007)

True independent advice should be a flat fee, for example €250/hour rather than a % based fee.

For example, if an investor was investing €5m - then 3% would be €150,000, does this sound like a realistic fee for investment advice?Of course not.

Independent advice should be a flat fee - otherwise there is a clear vested interest to encourage an investor to invest as much as possible.

I would also be wary of a mortgage/pension/investment broker...that is a lot of very different areas to be specialist on!


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## gonk (18 Jul 2007)

Nomansland said:


> When I asked him how much I owed for his services he said that the way they operated was that I could invest in whichever product I chose through them (including the Augusta syndicate) by simply paying him the initial 3% outlay instead of the nominee company.
> My question is does this constitute independent financical advice??


 
In a lot of cases, it is not possible for an individual investor to invest in a fund without paying the standard commission. Where someone approaches the fund provider directly, they just charge the same commission rate they would if the business was introduced through a broker, but pay it to themselves.

If you are getting fee-based advice, where an adviser is charging you a fixed fee or hourly rate, make sure you check if the adviser can get you a rebate of the normal commission. If you don't, while you may be getting unbiased advice, you may effectively end up paying twice.


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## South (18 Jul 2007)

gonk said:


> In a lot of cases, it is not possible for an individual investor to invest in a fund without paying the standard commission. Where someone approaches the fund provider directly, they just charge the same commission rate they would if the business was introduced through a broker, but pay it to themselves.
> 
> If you are getting fee-based advice, where an adviser is charging you a fixed fee or hourly rate, make sure you check if the adviser can get you a rebate of the normal commission. If you don't, while you may be getting unbiased advice, you may effectively end up paying twice.


 
I have never found this to be the case.

I have found that with a number of funds, if an investor goes direct they will of course pay the commission (the promoter keeping it in such a case).

However, in all cases, it has been possible to negotiate that the investor's commission goes into their investment "pot of money" if the investor has asked for a fee-based nil-commission arrangement through a fee-based adviser.


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## gonk (18 Jul 2007)

South said:


> I have never found this to be the case.
> 
> I have found that with a number of funds, if an investor goes direct they will of course pay the commission (the promoter keeping it in such a case).
> 
> However, in all cases, it has been possible to negotiate that the investor's commission goes into their investment "pot of money" if the investor has asked for a fee-based nil-commission arrangement through a fee-based adviser.


 
That's fine, as long as the investor is aware that investing directly does not automatically mean they will not incur commission and clarifies the situation prior to making the investment.

If you do not seek this clarification and make sure you agree a rebate of commission in some form, it is quite likely you will end up paying commission, even though you think you're investing on an execution-only basis.


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## South (18 Jul 2007)

gonk said:


> That's fine, as long as the investor is aware that investing directly does not automatically mean they will not incur commission and clarifies the situation prior to making the investment.
> 
> If you do not seek this clarification and make sure you agree a rebate of commission in some form, it is quite likely you will end up paying commission, even though you think you're investing on an execution-only basis.


 
Agree with you 100% on this.

But every fund can be accessed on a 0% commission basis, and do not trust any adviser who would have you believe otherwise!


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## barryo (19 Jul 2007)

If you want to know more about the company ask them for details about how well the other 5 are doing.
I invested in the fourth with Augusta. I went throught it in detail with my accountant. Like you I was attracted by German commercial property. Also, it is the same guy who did the forrestry funds some time back which I thought were a good idea. They have a german guy as one of their directors who does their negotiating over there which has it's advantages. Meet them in person with a list of questions and take your findings to an verified 'advisor' when you find one.
As for getting independent advice, I generally vet things with my accountant as it is hard in this country. If someone told me they were independent I would nearly make them take an oath on it - Definitely check them out to verify their claims.
best of luck


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## Nomansland (19 Jul 2007)

Thanks for all the reply's which have been very helpful. barryo, how long is the 4th fund up and running and are you pleased with its performance to date?


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## extopia (19 Jul 2007)

I'm glad someone else pointed out the connection with the forestry funds. There is a thread on these boards where the forestry people declined to answer some very basic questions about their funds. Perhaps someone else can find the link.


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## South (19 Jul 2007)

barryo said:


> I invested in the fourth with Augusta. I went throught it in detail with my accountant. Like you I was attracted by German commercial property. Also, it is the same guy who did the forrestry funds some time back which I thought were a good idea. They have a german guy as one of their directors who does their negotiating over there which has it's advantages.
> As for getting independent advice, I generally vet things with my accountant as it is hard in this country. If someone told me they were independent I would nearly make them take an oath on it - Definitely check them out to verify their claims.
> best of luck


 
Is the same guy that chooses forestry  investments choosing suitable commercial properties in Germany?


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## gonk (19 Jul 2007)

SPC100 said:


> So it seems, 42% of your original investment will be actually be eaten by known & disclosed costs associated with the project i.e. 27% + 15% (3%*5 years).


 
This sounds very dramatic, until you compare it with a "traditional" buy-to-let investment in, say, a €350k apartment. 

Purchase price €350,000.00
20% deposit €70,000.00
Stamp duty €21,000.00
Legal costs (1% + VAT) €4,235.00
Management charges @ €1,300 p.a. x 5 €6,500.00
Insurance @ €250 p.a. x 5 €1,250.00
5/8 of €10,000 fitout depreciated over 8 years €6,250.00
Rental agency charge @ €1,200 p.a.€6,000.00
Total costs over 5 years €45,235.00
Costs as percentage of initial investment (deposit + s.d. + legal) 47.50%

I've estimated costs at "typical" levels, based on my own experience. I know you could handle the rent yourself, but to compare like-with-like, as the Augusta investment is "hands-off", I assumed an agency handling lettings, collecting rent, etc.

The point is the costs as a high percentage of investment come about as a result of the gearing - not because the Augusta fund's charges are exceptionally high. There are ungeared property funds on the market for investors who are uncomfortable with this level of cost and risk. The potential gains are naturally lower too though.


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## barryo (20 Jul 2007)

The 4th is not even a year old, but I am told it performing ahead of prediction due to an expansion been allowed at the Hanover hospital which was hoped for but not factored in initial estimates. 

It should be noted I wanted a geared investment, which comes with increased risk. I also wanted something hands off. This was also recommended to me by a source which I trust.
Understand the costs for your peace of mind, but as was already explained, this can as expensive to do it yourself not to mention the hassle and time (which I dont have). 
South - If you read my earlier post you would have seen the properties are sourced by a German National who is a director.
I am not going to try to defend this to some who have little information on it and seem suspect et al. 
Their website is [broken link removed] The risks, costs, the lot are detailed in each offer document under the media link. 
To some I say read it then comment. I exclude those who put some genuine thought into their comments.
This type of investment is not for everyone but I was happy with it's structure and had professional advice. Please get advice to see if it fits the bill for you.


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## South (20 Jul 2007)

barryo said:


> South - If you read my earlier post you would have seen the properties are sourced by a German National who is a director.


 
No you said he does negotiating over there, does that mean he is the property picker?

Does he have a good property track record, or is he just there because he's German and it invests in Germany?


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## Nomansland (20 Jul 2007)

Thanks for all the input which has been of great help.

I sat down last night and done all the Maths on their charges, projected rental yields, forecasted intesrest rate for repayment, tax payout on rental yeild etc. etc. I don't have time to post it all up now but will do so tonight. However in summary, assuming I have done the Maths correctly (which might be a big if!!) after all expenses deducted and net rental payed back into fund after the 5 years the property would need to appreciate by 6.1% (compounded) per anum for an initial 50K to yeild 97K after 5 years before CGT is applied. (note this is the projected yield that they have stated). This sort of projected appreciation on commercial property seems quiet high and I am not so sure that its capable of it. I would need to research this some more.


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## Nomansland (23 Jul 2007)

duplicate post


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## Nomansland (23 Jul 2007)

duplicate post


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## Nomansland (23 Jul 2007)

Right, here are the calculations as promised. Please feel free to point out any mistakes as I am fairly inexperienced at all this craic. 

Inital cost of aquiring propertys = 8.65% of cost of buildings.
Inital 3% commison charge on 50K investment.

Inital investment from me = 50,000
Gearing of 80/20 from bank=200,000
Total investment(my share) = 250,000

Lets say cost of Building(my share) = 230,000
8.65% cost of aquisition = 20,000
------
Total cost of aquiring building=250,000

Annual 0.75% managment fee(0.75% of 250,000) = 1875 x 5 = 9375
Annual 0.3% owners maintenance charge = 750 x 5 = 3750

Total costs = 20,000 + 9375 + 3750 = 33125.

1st years rental income = 7.5% of value of property, Rental income increases 2.5% peranum there after.
7.5% of 230,000 = 17250
Minus 2% charge = 345
------
16905

Interest repayment on loan = 5.7% of 230,000 = 11400
This interest is subtracted from rental income

16905 - 11400 = 5505. This rental income is then taxed @ 26.375%
26.375% of 5505 = 1452. Therefore total net rental for year 1 is 5505-1452 = 4053.
I have calculated net rental yields from years 2,3,4&5 the exact same way except I have factored in the assumed 2.5% increase in the inital rental income figure per anum. 
My figures work out as follows,
Year 1 = 4053
Year 2 = 4364
Year 3 = 4683
Year 4 = 5010
Year 5 = 5344
-----
TOTAL = 23454

So now,
Total investment(bank + my own) = 250,000
Minus costs(inital + per anum) =      -33,125
                                                  -------
                                                 216,875
     Minus inital 3% on my 50K  =       -1,500
                                                 --------
                                                  215,375
         Add net rental income  =        +23,454
                                                 ---------
                                                   238,829
 Minus principle of 200K loan  =        -200,000
                                                  ---------
                                                     38,829

So after all costs and interest repayments have been deducted and net rental yields added in I am left with 38,829 of my inital 50,000 investment.
They have stated that it is reasonable to expect a return of 97,983 (before CGT is applied) on an inital investment of 50,000. 
So I am short 59,154 (38,829 + 59154 = 97,983). To make up this shortfall It would require the final value of my share of the property to be to be 309,154. This value of 309,154 minus the inital value of 230,000 makes up the 59,154 shortfall. 

So in summary the for my share of the property to reach this value, the property would need to see 6.1% appreciation compounded per anum to realise a final value of 309,154. I really don't know if this is feasabile!!


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## barryo (24 Jul 2007)

Why dont you go through your figures with them (Augusta) to test their calculations. I see a couple of things here, but this is not the place to debate them (Mainly due to the time needed). 

For your own information, take these figures to someone who gives professional advice and go through them with them.


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## GreatDane (25 Jul 2007)

extopia said:


> I'm glad someone else pointed out the connection with the forestry funds. There is a thread on these boards where the forestry people declined to answer some very basic questions about their funds. Perhaps someone else can find the link.


 


Hi

The chap your thinking of is Declan Kennedy, he established the Forestry Funds many years ago, won a notable award for the concept at the time etc.

As I have it, he has absolutely no invovlement with the Forestry Funds these days, having sold out his interest several years ago.

He's a very open guy, give him a call at Augusta & have a chat with him on his background, the info published in the marketing etc.

I'm suprissed this has not been mentioned already, but in addition to having a German national as a director to help with language issues etc the Augusta team source all their properties in conjunction with Colliers International (as in Colliers Jackson Stops fame) .... 

Come on guys, read the info available here 

Best of luck to anyone investing in this fund.  Based upon other similiar style funds being offered around (ie German Commercial Property Syndicated Funds), such as Friends First Oyster Fund which his now full, the funds offered by the firm of Accountants in Cork (sorry name escapes me, CCI or something perhaps ?) etc the returns projected appear in line.

I think a vital point to note with all syndicate investments is how they will be managed, proactively (i.e. attempts to renegotiate leases, increase density, get new tenants into vacant units, get planning & perhaps build more units etc) is vital to the return .... as against a passive manager who purely sits on the asset & collects the rent each quarter / month 

Cheers


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## South (26 Jul 2007)

Garrettod said:


> Hi
> 
> The chap your thinking of is Declan Kennedy, he established the Forestry Funds many years ago, won a notable award for the concept at the time etc.
> 
> ...


 
Any vested interest to declare Garrettod, you don't happen to have Declan's phone number handy?


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## F. Kruger (26 Jul 2007)

Garrettod said:


> Hi
> 
> I think a vital point to note with all syndicate investments is how they will be managed, proactively................
> 
> Cheers


 
I think that it might be more appropriate if they were up-front with their disclosure on how gearing effects the initial investment


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## gonk (26 Jul 2007)

F. Kruger said:


> I think that it might be more appropriate if they were up-front with their disclosure on how gearing effects the initial investment


 
As I pointed out in my earlier post, this is a normal effect of gearing any investment - it is not unique to the Augusta fund. Anyone who does not fully understand the effects of gearing an investment and in particular the extra risk it entails should stay well away from geared investments.

In my view, the Augusta product brochures provide very clear risk disclosure. The figures given above for the costs as a proportion of the initial investment come from their brochure. The brochure also contains a separate recommendation that prospective investors get independent advice relevant to their own particular circumstances. I don't know how much more up front they could reasonably be expected to be.

By the way, my only connection to Augusta is that I have invested in one of their earlier funds.


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## Daithi7 (26 Jul 2007)

I've read the prospectus and it seems reasonably ok to me provided the underlying assumptions hold up of course. One issue I have is that they explicitly mention that german banks pay for the set-up of loans to management cos, but these will only be done on a hands off basis. These to me are blatant backhanders and there should be an undertaking that all such fees, rebates, etc are netted back into the fund. The setting up of finance, etc is after all what the syndicate pay .75% of the total fund value p.a. to a manager for. 

Is the total fund value that the management charge is based on recalculated each year? and if so how is this done?

thanks
D


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## GreatDane (26 Jul 2007)

South said:


> Any vested interest to declare Garrettod, you don't happen to have Declan's phone number handy?


 

Hi

Sorry guess we all have to answer this one (often, even before it's asked), vested interest or not these days 

In answer to your question, Im not staff, living with Declan etc  

I am a small investor in a couple of the Augusta Funds & have interacted with Declan on several occassions, he makes a point of being very hands on at Augusta from what I've seen and heard from friends who also invested. Happy to recommend him 

It's easy to make contact with Declan or several of the others at Augusta, simply use any of the following methods:

tel: 00 353 1 2300 858

fax: 00 353 1 2300 868

e-mail: info@augusta.ie


[broken link removed]


Regards

G>


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## South (26 Jul 2007)

Well with a name like Augusta they must be great fund managers, such an impressive golf course and all!!


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## barryo (26 Jul 2007)

Slagging for the sake of slagging - constructive - What are you selling then ?


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## South (26 Jul 2007)

barryo said:


> Slagging for the sake of slagging - constructive - What are you selling then ?


 
Not selling anything just an actuary working in an insurance firm.

I tend to have reservations about firms that adopt grandiose names that are of little relevance, I am also wary of firms that dish out fancy brochures like they are confetti, that's just my opinion...certainly does not mean it's right!


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## gonk (26 Jul 2007)

South said:


> I am also wary of firms that dish out fancy brochures like they are confetti, that's just my opinion...certainly does not mean it's right!


 
Putting a PDF up on a website is hardly dishing out brochures like confetti. Does your employer not do any marketing and does it not produce brochures for its products? If not, how does it stay in business?

After all, isn't the cliché among insurance salesmen that "insurance is never bought, it's sold"?


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## barryo (27 Jul 2007)

Take a read of said brochure and let us know what you think of the inside details.


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## South (27 Jul 2007)

gonk said:


> Putting a PDF up on a website is hardly dishing out brochures like confetti. Does your employer not do any marketing and does it not produce brochures for its products? If not, how does it stay in business?
> 
> After all, isn't the cliché among insurance salesmen that "insurance is never bought, it's sold"?


 
I am not sure what my employer has to do with this, but we are a Reinsurance Company so we do not really have to look for customers, we compete on pricing.

I would be very wary of any investment that makes claims (as if they are assured) of double digit returns...I also think it might be a little bit late for jumping on the German Commercial Property bandwagon.

Caveat: it's only my opinion.


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## gonk (27 Jul 2007)

South said:


> I am not sure what my employer has to do with this, but we are a Reinsurance Company so we do not really have to look for customers, we compete on pricing.


 
You said you'd be wary of Augusta for producing a brochure to market its product. You mentioned the business of your employer, and if it doesn't produce marketing brochures, then certainly the insurance companies to which it provides reinsurance services do. Are they at fault for doing so?



South said:


> I would be very wary of any investment that makes claims (as if they are assured) of double digit returns....


 
God, you're wary of a lot of things aren't you? Maybe it goes with being an actuary and spending every day calculating risks . . . Augusta make no such claim. 

If you read the brochure, they say returns of this level are _possible_ and they provide full details of the assumptions they have made in producing their projected figures. Prospective investors can judge for themselves how realistic the assumptions are. They make very clear the projected returns are not "assured" and that in the worst case the entire investment could be lost. In my view, the brochure is not in any way misleading.

Well managed geared property funds could produce such levels of return. Two I've already invested in with Friends First are showing returns of 82% over 3 years and 30% in 11 months respectively. I'm only in the Augusta investment 8 months, so I can't say how it's doing so far.



South said:


> I also think it might be a little bit late for jumping on the German Commercial Property bandwagon.....


 
You could be right - time will tell. But as Garretod points out above, there's a lot more to these types of investment than market conditions. If the properties are well chosen and actively managed to maximise returns, then above average returns are likely. The reverse is also true.


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## GreatDane (1 Aug 2007)

Hi

For the record, Im not underwritting this investment btw, I just believe it can do well ... so will probably try and rustle up the dosh to sign up for it 

Cheers

G>


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## South (1 Aug 2007)

The closing date is last Friday...or were they unable to raise sufficient funds?


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## barryo (1 Aug 2007)

South, At least you read the closing date.. if not the prospectus


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## South (2 Aug 2007)

I read the prospectus, no original thinking in it, only point of note was that the closing date was last week.


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## gonk (2 Aug 2007)

South said:


> I read the prospectus, no original thinking in it, only point of note was that the closing date was last week.


 
I didn't know originality of thinking was a prerequisite for achieving good investment returns.

However, having read the prospectus, are you now prepared to withdraw your false assertion that it:



South said:


> makes claims (as if they are assured) of double digit returns.


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## South (2 Aug 2007)

Definitely not, having read their prospectus, and seeing this on their website:

*Benefits to Investment *

_*€97,983* projected return on a €50,000 investment after 5 years _
_Projected *14.7% p.a.* Internal Rate of Return (IRR) _
_Low management charge of *0.75%* and low acquisition costs _
_A focus on *high yielding* retail property _
_Potential for significant *capital appreciation* _
_*Non-recourse* borrowing_
Projecting a return of 14.7% is a bit optimistic in my book!

I do not think one can earn base rates * 3.7 by following the herd into European Property.

That's just my opinion, maybe returns of 14.7% are easy to get these days.


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## gonk (2 Aug 2007)

South said:


> Projecting a return of 14.7% is a bit optimistic in my book! .....
> 
> I do not think one can earn base rates * 3.7 by following the herd into European Property. ....
> 
> That's just my opinion, maybe returns of 14.7% are easy to get these days.


 
It may well be optimistic and you're fully entitled to your opinion.

However, your assertion that Augusta claimed their projected returns are "assured" is factually incorrect.


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## South (2 Aug 2007)

I said as if they are assured.

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.

Do you think they are almost assured?

If you do, get on it FAST.


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## gonk (2 Aug 2007)

South said:


> I said as if they are assured.


 
You are splitting hairs.


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## ClubMan (2 Aug 2007)

South said:


> 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.


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## South (2 Aug 2007)

gonk said:


> 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.


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## gonk (2 Aug 2007)

ClubMan said:


> 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.



ClubMan said:


> 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.



			
				South said:
			
		

> 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.


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## South (2 Aug 2007)

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


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## ClubMan (2 Aug 2007)

gonk said:


> 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.


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## gonk (2 Aug 2007)

South said:


> 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.



			
				Clubman said:
			
		

> 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.


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## South (2 Aug 2007)

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.


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## gonk (2 Aug 2007)

South said:


> 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.



South said:


> 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.


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## South (2 Aug 2007)

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!!!


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## gonk (2 Aug 2007)

South said:


> 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.


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## South (2 Aug 2007)

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.


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## gonk (2 Aug 2007)

South said:


> 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.


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## South (2 Aug 2007)

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!


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## ClubMan (2 Aug 2007)

gonk said:


> 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.


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## gonk (2 Aug 2007)

ClubMan said:


> 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.



			
				South said:
			
		

> 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.


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## South (2 Aug 2007)

gonk said:


> 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.


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## gonk (2 Aug 2007)

South said:


> 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?


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## ClubMan (2 Aug 2007)

gonk said:


> 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%.


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## South (2 Aug 2007)

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?


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## gonk (2 Aug 2007)

gonk said:


> 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?


 
I note once again you have refused to address this point which I've put to you half a dozen times now.


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## ClubMan (2 Aug 2007)

OK - this thread is going nowhere now so I'm closing it.


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