RMB Private Bank is offering its clients the opportunity to cap their interest rate exposure, Absa Private Bank has launched two investment products designed to comply with Islamic banking principles and Nedbank has launched a money market bank investment.
Absa Private Bank
Name of investment: Islamic Investment Account and Islamic Offshore Investment Account.
What it is:
The Islamic Investment Account and the Islamic Offshore Investment Account are the first two investment products in the Absa Wealth series.
They are essentially equity portfolios designed to suit different risk profiles.
The investment account offers investors a choice of three domestic equity portfolios: the Equity Portfolio (moderate to aggressive risk), the International Feeder Portfolio (moderate risk), and the Balanced Aggressive Portfolio (high risk).
The Absa Islamic Offshore Investment Account (moderate to aggressive in risk) offers investors exposure to international equity markets through the Global Equity Portfolio.
How it works:
To ensure that the underlying investments in the portfolio comply with Shari'ah (Islamic law), a thorough analysis will be made of the core business and source of revenue.
This analysis will be done for Absa Private Bank by the independent Shari'ah Advisory Board of Oasis Group. Oasis Asset Management will manage the underlying assets in the investment portfolios on behalf of the bank.
The advisory board will restrict the asset manager from investing in companies where their primary business activities are not permitted by Shari'ah law: for example companies dealing with alcohol, tobacco, pork-related products, conventional financial services, defence or weapons production and forms of entertainment such as gambling and pornography.
The income component of the investment - which Muslims are not allowed to receive - will be transferred to the Crescent Charitable Trust and donated to approved charities.
The investments will be administered by Absa Investment Management Services.
Who should invest:
Any individual, trust or company who wants to achieve capital growth on investments and invest in products with an ethical mandate, whether they are Muslim or not.
It allows investors to participate in the equity markets in the knowledge that their investments are managed in line with their religious values.
How to invest:
To qualify for the Offshore Investment Account, you must be 18 years or older but there is no age restriction for investing in the domestic portfolios through the Islamic Investment Account. To invest, speak to an Absa financial adviser, your broker or any independent financial adviser.
Guarantees provided:
No guarantees are provided.
As with any equity investment, the value of your investment can move up and down in line with market performance.
Minimum investment amount:
You can invest either a minimum monthly amount of R300 or in a minimum lump sum of R20 000 into the account. You can also invest in a combination of monthly amounts and lump sum.
To invest in the Offshore Investment Account, you can only invest in a lump sum of R50 000.
Investment term:
There is no set investment term but as with any equity investment you should invest for the medium to long term.
You should not withdraw from your investment for at least three years. It will take three working days for you to receive your money when you want to terminate your investment in the investment account or withdraw a portion of your investment. Withdrawals from the offshore investment account will take three weeks.
Costs:
Bear in mind that you will pay fees - both upfront and ongoing - to invest in the portfolio of your choice and there are costs associated with each of the underlying investments in the portfolio.
The costs of the product depend on whether you invest in a lump sum or monthly, and whether you invest in the local investment account or the offshore investment account.
Costs are structured on a sliding scale and the larger your investment, the cheaper the charges.
Charges on the Investment Account (excluding VAT):
On lump sum investments initial charges range from 0.3 percent for amounts above R1 million, up to 1.75 percent for investments of R100 000. The cost of monthly investments range from 0.5 percent for amounts over R5 000, up to 2.25 percent for the first R1 000.
If you invest monthly, you also pay an annual administration fee in addition to the once-off fee. The annual fee ranges from 0.25 percent for amounts over R1 million, up to 0.75 percent on the first R250. No termination charges apply.
Charges on the Offshore Investment Account:
An initial fee of 1.75 percent applies as well as an annual fee of 0.50 percent. No termination charges apply.
Underlying costs on both the investment account and offshore investment account:
These costs will vary depending on the actual investments made by the portfolio manager. But you can expect to pay between one and 1.75 percent of the amount that is invested in the underlying investments each year . All fees quoted do not include VAT (14 percent).
Commissions:
The fee that you pay to the financial adviser is open to negotiation. The average commission is 2.5 percent to three percent of the investment upfront and 0.5 percent a year. Commissions are quoted excluding VAT.
Nedbank
Name of investment:
Money24 Investment Account
What it is:
This is a money market bank investment product. Interest is calculated on a daily basis and paid monthly.
The only restrictions are the minimum investment amount is R10 000; and you can only withdraw a minimum withdrawal amount of R1 000 - as long as the minimum investment of R10 000 is maintained. This is to encourage you to save and discourage you from withdrawing small amounts. Deposits can be made via internet banking.
Who should invest:
Any person or small business seeking a relatively good interest rate and quick access to their money.
Risk level:
Like a normal bank investment, Nedbank's Money-24 Investment Account is a low-risk investment. Your capital is fully guaranteed by Nedbank and you have full access to your funds within a 24-hour notice.
Minimum investment amount:
R10 000.
Minimum investment term:
There is no minimum investment term. You have full access to your funds within 24 hours.
Annual interest rate:
The interest you receive on the investment varies depending on the amount you invest. Investments of between R10 000 and R20 000: 3.75 percent; R20 0000 to R100 000: 5.20 percent; R100 000 to R250 000: 5.7 percent; R250 000 and more: 5.75 percent. These rates are subject to fluctuation and Nedbank does not guarantee these rates.
Costs:
There are no charges or penalties associated with the Money 24 account.
RMB private bank
Name of investment:
Cap Rate feature.
What it is:
A feature which allows you to cap the interest rate that you pay on your RMB Private Bank debt facility.
How it works:
RMB Treasury will take out a interest rate derivative for you based on the period and the rate at which you wish to cap your interest rate.
For example, Client A has a loan facility of R1 million and an interest rate of 8.5 percent (prime minus two percent). He chooses a strike rate of 12.5 percent (current prime plus two percent), which after the discount on prime means he will pay no more than 10.5 percent over three years. In this case, the cost of the cap is 1.41 percent of the facility amount, which is R14 046.92 and is payable upfront.
Client B chooses not to cap his rate and his discounted interest rate rises gradually to 11 percent over 36 months. At this stage, the interest costs would be the same as for Client A who decided to pay an upfront charge to cap the rate at 10.5 percent.
Client A will begin saving should rates rise one percentage point to 11.5 percent for more than 18 months. Further savings would kick in if rates were to rise by 1.5 percentage points above the discounted rate for 12 months.
Interest rate:
You can choose one of three predetermined strike rates from prime plus one percent, to two percent or three percent.
Who should use the product:
RMB Private Bank clients who want to protect themselves from an increase in the prime lending rate. Clients will still benefit should the prime rate fall.
Guarantees provided:
Your interest rate will not rise above the rate you chose based on the predetermined strike rate and for the period for which you bought the cap .
Minimum amount:
The minimum cap amount is R750 000 and your loan must be at least R750 000.
Cap term:
You decide whether you want to buy the cap for two, three, four or five years.
Costs:
The upfront, once-off cost (which cannot be added to your existing facility) to buy a cap is determined by the strike rate you choose and the period for which you buy the cap. It is calculated as a percentage of the capped amount. Currently the cost ranges between 0.5 percent for the higher strike rate shorter period caps and seven percent for the lower strike rate an longer period caps.
Commissions:
None.