# Hibernians spectrum bond going through the floor



## johnodkc (4 Dec 2007)

I invested 130k(geared) in Hibernians spectrum bond through a financial advisor, in June 06. It has taken a major hit and now stands @ 103k. I have an option of cashing my shares. What should I do? Hang in or take a hit of almost 30k now?
Has anyone else invested in the same?


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## ClubMan (4 Dec 2007)

Why did you choose this investment in the first place? 
What was/is your investment timeframe?
What advice were you given on it?
From whom (independent advisor or a tied agent)?
Were you aware of the risk/reward profile of the investment?
How much of your overall wealth does this investment represent?
What other debts/savings/investments do you have?
Do you need the money now?


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## johnodkc (4 Dec 2007)

answer to questions:
*Why did you choose this investment in the first place? 
*On advice of Financial Advisor

*What was/is your investment timeframe?*
5 yrs to begin with

*What advice were you given on it?
*Recommended as a good investment

*From whom (independent advisor or a tied agent)?*
Independent Advisor

*Were you aware of the risk/reward profile of the investment?
*I knew there was a risk, but didnt expect this!

*How much of your overall wealth does this investment represent?*
50%

*What other debts/savings/investments do you have?
*No major Debt. I have 100k in Stock market fund (Canada Life), which is also down about 7%

*Do you need the money now?*
I dont need right now.


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## ClubMan (4 Dec 2007)

Have you spoken to your financial advisor mentioned above about your concerns? 

On the other hand if s/he just said that this fund was a good investment for 50% of your wealth without giving more pros/cons and balanced info then I would question their ability to dispense good advice. Is this person an authorised advisor or a multi-agency intermediary?

What charges (up front and ongoing) apply to this product?


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## johnodkc (4 Dec 2007)

Talked to  next in charge. She was hinting @ withdrawing funds.
regulated by the Irish Financial Services Regulatory Authority (IFSRA) as a multi –agency intermediary and a mortgage intermediary.
Will get back regarding charges.
What do you think I should do?


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## capall (4 Dec 2007)

Why would you think about withdrawing now,the markets are getting clobbered,of course your fund will be down

I'm sure you were told when investing that this bond was only suitable for 5+ years investment horizon,this bond is invested in various funds
Find out what these funds are ,I am sure it is on your documentation, and check that the drops are in line with the market

There should be a much stronger likelihood that the funds will bounce back over a future period then that they will fall further


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## F. Kruger (4 Dec 2007)

johnodkc said:


> I invested 130k(geared)..


 
What do you mean by 'gerared'? Is it a property fund?


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## ClubMan (4 Dec 2007)

johnodkc said:


> What do you think I should do?


I would not panic and withdraw everything in a kneejerk reaction to market volatility. But then again I would not have 50% of my overall wealth in a single investment either.


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## Brendan Burgess (4 Dec 2007)

I suspect that you have invested in a property fund within the range of Hibernian funds. 

The Hibernian Property Fund had a once off reduction in value of 4.7% (9.4% for the geared version) back in July. This is somewhat artificial and is designed to deter people withdrawing their money. When the funds inflows and outflows match each other, this artificial reduction will be removed. 

It also has an early exit penalty of around 4% this year. 

So if you don't need the money, you should stay in it. 

You should ask the broker to explain why he recommended this fund. If you feel that you were misled, you should complain. And if you don't get a satisfactory response, go to the Ombudsman. 

Brendan


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## johnodkc (4 Dec 2007)

sorry for the typo.its a geared property fund


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## johnodkc (4 Dec 2007)

Yes she mentioned that there was a reduction. If it happened in July should I not have been informed?
Are advisors obliged to relay such information immediatley?


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## johnodkc (5 Dec 2007)

Brendan said:


> I suspect that you have invested in a property fund within the range of Hibernian funds.
> 
> The Hibernian Property Fund had a once off reduction in value of 4.7% (9.4% for the geared version) back in July. This is somewhat artificial and is designed to deter people withdrawing their money. When the funds inflows and outflows match each other, this artificial reduction will be removed.
> 
> ...


I Dont need the money right now. My Financial Advisors now say they are transferring all their clients money into cash. I guess this will decrease the value even more. If I Hang in for 5 years , what is the chance that I will have any kind of reasonable return?


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## ClubMan (5 Dec 2007)

johnodkc said:


> IMy Financial Advisors now say they are transferring all their clients money into cash.


What relevance to you is what other clients of theirs are doing!? They should be assessing your specific needs on an individual basis and not just telling you to follow the herd. Sounds to me like your _FA's _advice is a bit ropey! Maybe you should ditch them and find somebody who is more helpful and better informed/skilled?


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## Conan (5 Dec 2007)

"my Financial Advisors now say that they are transferring all their clients money into cash"??????

If I was a client this would really worry me:

Why transfer into cash  after the value has fallen, thus crystallising the notional loss
How long will they stay in cash?
When will they re-invest into the market?
Are they getting out at the bottom (or thereabouts) and will likely only re-invest after the market has risen again ( a double-whammy)
Are they suggesting that they will switch into cash irrespective of what their clients long-term objectives are?
This to me does not sound like good "advice". Before taking any action, the questions I would ask are:

Have your circumstances changed such that you need the cash now?
Has your investment time-frame changed?
If you can take a 4 to 5 year view (as you suggested originally) then a kneejerk reaction (getting out at the bottom - perhaps) probably represents a poor decision. 

Its a cliche (I know), but investing is about "time" not "timing". If your advisor is suggesting that they can "time the market" (which they clearly did not do over the last few months) then their are loiving in a fools paradise (I certainly would not join them).


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## kellyiom (5 Dec 2007)

ClubMan said:


> What relevance to you is what other clients of theirs are doing!? They should be assessing your specific needs on an individual basis and not just telling you to follow the herd. Sounds to me like your _FA's _advice is a bit ropey! Maybe you should ditch them and find somebody who is more helpful and better informed/skilled?


 
heh, I'm back and finding myself strongly agreeing with the ClubMan! Think that's a very good point. Would be nice if he was rebating some of his take in acknowledgement of the disappointment, sharing the pain and all that.  That said, it would be worth establishing the exact cause of the drop; is it connected to a drop in value of one particular property or is the general gapping in values being seen everywhere at the moment? Even the very biggest and oldest funds are raising lots of cash at present and marking down values in order not to prejudice investors who stay in their funds. And December could be choppy too as the interbank market rates will possibly spike up, hurting leveraged investors yet more...but it might be worth riding this out if the overall book of underlying assets is still sound.


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## johnodkc (5 Dec 2007)

I dont need the cash right now, and the 5 yr time frame remains-may be even longer if the conditions are right.
I guess the drop in value is connected to rising interest rates.... and drop in invester confidence.


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## derryman (5 Dec 2007)

who says we are at the bottom of an Irish property market adjustment - the brokers could be right in advising client to cash ahead of further drops


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## kellyiom (5 Dec 2007)

derryman said:


> who says we are at the bottom of an Irish property market adjustment - the brokers could be right in advising client to cash ahead of further drops


'tis true ^^ - that's why I'm keen on drilling down into the underlyings. If they're attractive properties, then for the commercial tenant, they can't have _too _much room to manoeuvre so might give you some comfort regardless of overall market tops and bottoms, cos even in a downdraft, some things always stabilise or even rise.


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## ClubMan (5 Dec 2007)

derryman said:


> who says we are at the bottom of an Irish property market adjustment - the brokers could be right in advising client to cash ahead of further drops


Yes - but (seemingly) advising a client to cash in because everybody else is doing it makes no sense. The _FA _should be (and should have in the past) done a property fact find and financial review to assess the individual's specific needs rather than telling them that product X was a "good investment" and now that it has fallen that they should cash in. Of course we are only going on one side of the story here so maybe there is more to it than that but from the info posted the _FA _sounds useless to me.


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## johnodkc (5 Dec 2007)

Its actually Uk property


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## kellyiom (5 Dec 2007)

then even more reason to stay put (on a pure gut feeling with zero research). Hibernian, is Aviva, right? Aviva's Norwich Union and they've recently announced big mark-downs in values on their property investments and I guess this will be feeding into one of them. I don't think anyway there is a problem fundamentally with the process there from what I know and 'you' (Euro investor) will be hurting a little more due to the yield difference between £ & € when hedging it. Good article on it in the FT if you have an account. Good luck.


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## johnodkc (5 Dec 2007)

kellyiom said:


> then even more reason to stay put (on a pure gut feeling with zero research). Hibernian, is Aviva, right? Aviva's Norwich Union and they've recently announced big mark-downs in values on their property investments and I guess this will be feeding into one of them. I don't think anyway there is a problem fundamentally with the process there from what I know and 'you' (Euro investor) will be hurting a little more due to the yield difference between £ & € when hedging it. Good article on it in the FT if you have an account. Good luck.


Thanx for the advice. I think I might hold on and take my chances. Surely it cant get much worse...!


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## Another John (5 Dec 2007)

I've just seen this thread , the U.K. commercial property market has further to fall according to commentators in yesterdays Financial Times. The comments came from Schroders and others. They expect a further 10% to the bottom.

This market fall was well telegraphed by the large U.K. REITs falling 25% below net asset value early this year.

The Large REITs are now 40% below net asset value which with the effects of gearing are forecasting a 25% fall in U.K. commercial property.

I hope this helps.

Another John


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## johnodkc (5 Dec 2007)

so do you think I should cash in?


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## johnodkc (5 Dec 2007)

ClubMan said:


> Yes - but (seemingly) advising a client to cash in because everybody else is doing it makes no sense. The _FA _should be (and should have in the past) done a property fact find and financial review to assess the individual's specific needs rather than telling them that product X was a "good investment" and now that it has fallen that they should cash in. Of course we are only going on one side of the story here so maybe there is more to it than that but from the info posted the _FA _sounds useless to me.


What they are actually doing is advising people to cash in!


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## tyoung (5 Dec 2007)

From the website there is a 5% early encashment penalty if you withdraw in year two. You might consider moving some of your money into one of their other funds. 
Get rid of your advisor what ever else you do.


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## derryman (6 Dec 2007)

johnodkc said:


> Its actually Uk property


 
GET OUT NOW TO CASH

The UK correction is only starting and the subprime mess there is as bad as the states - Northern rock 130% "liar loan" mortgage anyone..........


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## Conan (6 Dec 2007)

Derryman,
Another well argued and cogent response. Sounds like the Financial Advisor in this case.

The typical kneejerk reaction is to encash when markets have fallen and only to re-invest when they have risen. Thus losing out on both sides.

If the Financial Adviser was recommending this investment 18 months ago and is now suggesting bailing out after a fall, it suggests that the initial premise for the strategy was flawed (on both sides?). If your timeframe is still 5 years or longer I would stick with it.


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## kellyiom (6 Dec 2007)

I'd agree with Conan; actually seems like the 130% loans are a small part of the UK banking system and in any event wouldn't necessarily impact the activities of a commercial property fund (other than sentiment).  All the banks in the UK have been reporting negative news relating to subprime, but importantly, not ugly surprises as in Merrill Lynch's case. RBS and Alliance and Leicester have both been better than expected. The real exposures are no longer sitting on the Banks' books, they've long gone elsewhere.


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## derryman (6 Dec 2007)

Conan said:


> Derryman,
> Another well argued and cogent response. Sounds like the Financial Advisor in this case.


 
Conan - you would not be a financial advisor (you seem to offer quite technical pensions advice for a punter) - would you?

The OP was very clearly sold a product that he/she did not understand - the UK property market is starting to drop - he may have missed the peak to get out but is IMHO quite far away from the precipitous bottom - clearly an informed judgement call is to get out until he / she understands

I would advise moneyweek.co.uk or ft-alphaville if anyone wants an informed view of the UK markets - without the VI financial advisor BS.

BTW while we are at it - the irish property correction, the ISEQ correction - the signs were all there to see if the eyes were open and VIs shut up

Ah yes - I have ducked both bullets in the last year by being informed.


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## johnodkc (6 Dec 2007)

Thanks all for the advice, conflicting as it is!
I guess the bottom line is. If I stay in for a period of 5 yrs, is there a chance that my product will even get back to the original value... or will it be worthless?


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## derryman (6 Dec 2007)

johnodkc said:


> Thanks all for the advice, conflicting as it is!
> I guess the bottom line is. If I stay in for a period of 5 yrs, is there a chance that my product will even get back to the original value... or will it be worthless?


 

If it was a highly leveraged geared property investment with no capital guarantee and the fund is barring the exit with penalties - the prognosis is not good

If however they simply bought a commercial office in the city of London on an outright cash purchase basis (highly unlikely - haha) - the sky will not fall in


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## Conan (6 Dec 2007)

Derryman,
Rather that say "I told you so" (after the event) I have attempted to respond to the position that the original poster is in (rather than the one you think he should not have entered in the first place).

Am I a financial adviser (though that does not necessarily make my views less relevant). I have no connection to Hibernian.

Telling me (or the original poster) that the "signs were all there to see" does not change the current position. With hindsight the signs are always clearly marked. But the correction in the Irish Property market has been predicted for about the last 8 years (David McWilliams et al) The media etc are littered with those who have predicted 7 of the last two corrections. Looks like their time has come to tell us all how right they were. 

But if you had been in Cash for the last 8 years or so (as opposed to UK property, Irish property or the ISEQ) would you be better off? I suggest not.

Can I again suggest that trying to time the market is like fools gold. If the OP can still take a 5 year view I believe the best decision (based on where he actually is) is to stick with it.

Just my opinion, I dont claim to be a clairvoyant.


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## johnodkc (6 Dec 2007)

Losing 30% of my investment already, I think I might hang in....30k is a massive hit


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## PMU (6 Dec 2007)

johnodkc said:


> Thanks all for the advice, conflicting as it is!
> I guess the bottom line is. If I stay in for a period of 5 yrs, is there a chance that my product will even get back to the original value... or will it be worthless?


 Two things you should consider: No other poster has an investment in this fund, so no one else is exposed to the same risks as you. Therefore, you should be somewhat circumspect on the advice given.  Also, as this fund is closed, its factsheet or prospectus are not on Hibernian’s website so no one can analyse the product, and give you advice on it.
  For what it’s worth, I think this is probably the same fund as the Hibernian UK Property Fund but you have bought a geared version. I’ve checked my holding in the non-geared fund and it’s down about 12%.  Am I worried? No, because I think property funds are very long term investments (i.e. ten years min), also I don’t think that total property should be no more than 15 - 20% of your total portfolio.  
  If we are talking of the same fund, the 10 buildings in the fund have tenants and are providing cash flow (as they were when the fund was sold to you) but, as they are required to do so, the fund managers have marked down value of the buildings to reflect the decline in UK commercial property. As you have a geared fund, you will, therefore, experience more dramatic falls in value.
  In the immediate future, I think that values of UK commercial property may well fall, and, in this connection,  you could look at these post on the UK Motley Fool site: [broken link removed] and [broken link removed]
  If this happens, you will suffer significant greater reductions in value because you are geared.  (But you may also experience greater increase in value when / if UK commercial property recovers).
  Also, based on the Motley Fool posts, it’s not beyond the bounds of possibility that redemptions may be suspended or (more likely) that Hibernian will continue to decrease the value of units – thus protecting investors like me who are in for the long term.
  For what it’s worth, on the principle that you shouldn’t invest in anything you can’t afford to loose, I’d stick with it, but you are looking at possible continuing and immediate declines in value and a long time to recovery.
  (I’d also shoot your adviser.)


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## johnodkc (7 Dec 2007)

Thanks for the advice and the links. I think I might hold on, I'm afraid I got v poor advice. It's time to change advisors.


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## derryman (17 Dec 2007)

Dear John

I hope you beat a hasty exit when advised several weeks ago - the fat lady is back in the dressing room and the stage hands are sweeping up, double or quits time I think.


"Hibernian has become the first fund manager to impose exit penalties on investors trying to flee Irish commercial property. The company imposed a 12.25% exit penalty on Thursday on those quitting its Irish property fund and a 24.9% on those leaving a geared version of the same fund. "

*Fund moves to stop Irish property exit* 
Sunday Times Dec 16, 2007


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## czechmate (17 Dec 2007)

derryman said:


> Dear John
> 
> "Hibernian has become the first fund manager to impose exit penalties on investors trying to flee Irish commercial property. The company imposed a 12.25% exit penalty on Thursday on those quitting its Irish property fund and a 24.9% on those leaving a geared version of the same fund. "


 
If you are invested in property you should have expected about 12% to be deducted from your value at some stage.  It's pure luck if you avoid these costs, and certainly no penalty that you do incur them.  If you buy any property and then sell it, you would incur about 12% costs in doing so (stamp duty at 9% is the main cost, but there are estate agent and solicitor fees, for both the purchase and the sale, making up the rest).  These costs don't disappear by magic if you are investing in property through a fund.


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## derryman (18 Dec 2007)

Yes I can just see the small print that John was referred to - 

terms and conditions apply, 
share price can rise and fall, 
currency fluctuates

and we reserve the right to SLAM the door on any nervous investors with a WHOPPING +24.9% tax on your already considerable +25% losses - nervous yet???

Ye Har -- the financial buccaneer rides again


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## ClubMan (18 Dec 2007)

Surely it's hardly surprising that a geared fund may multiply your losses or am I missing something here?


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## kellyiom (18 Dec 2007)

exactly. And as for exit penalties, well, they come with the territory- back on the 4th or 5th Norwich Union were announcing them and since then New Star have so they're everywhere but they only apply if you have to _exit _so on a longer view, don't personally think panic button should be hit right now. Think Czechmate made a v.good point about investing property in general btw.


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