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Alternative investment products excite retail investors, bring new risks

Sharanya Pillai
Sharanya Pillai7/2/2018 08:00 AM GMT+08  • 9 min read
Alternative investment products excite retail investors, bring new risks
SINGAPORE (July 2): Financial blogger Kevin was over the moon when he found out about new private equity bonds for retail investors issued by Azalea Investment Management, a unit of Temasek Holdings. Believed to be the first of its kind in the world, the
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SINGAPORE (July 2): Financial blogger Kevin was over the moon when he found out about new private equity bonds for retail investors issued by Azalea Investment Management, a unit of Temasek Holdings. Believed to be the first of its kind in the world, the Astrea IV bonds are backed by cash flows from a US$1.1 billion ($1.5 billion) portfolio of 36 private equity funds. Retail investors needed to fork out just $2,000 to buy into the so-called Class A-1 tranche, which carries a relatively modest coupon of 4.35% per annum. To be sure, there are higher-yielding products around, but the attraction of Astrea IV lies in its novelty.

Kevin, who says on his blog that he used to be a “corporate lawyer who drafted IPO prospectuses for a living”, recalls that he was “absolutely enthralled” when he first heard about Astrea IV. He wrote several lengthy pieces on his blog, Financial Horse, and says he appreciates the fact that Azalea has structured something new and innovative specially for retail investors. “I have little doubt that [Azalea] could have easily gone straight to institutional investors [instead] and filled their books many times over,” says Kevin, who declined to give his full name.

Investors such as Kevin may have more reason for excitement as retail investors gained another investment opportunity previously available only to sophisticated investors and institutions. On June 20, United Overseas Bank Asset Management announced that it was setting up its first fund, offering retail investors exposure to alternative investments.

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