Author: Investment Stab

CPF: Better Fixed Interest than Fixed Deposit

This post will contain a tip on how to increase your CPF returns, namely in the form of interest.One way to earn more interest from CPF is to transfer your extra money, into your CPF Special Account.Your Ordinary Account currently earns 2.5%, Specia…

4 Telegram ChatBots that Helps You Save Money

Apps are no longer the next big thing. They take up space in our phones, requires us to download and continuously update them.Instead, chatbots seem to be the next big thing.Just a few years ago, the mantra was “there’s an app for that”.Today, the mant…

3 Reasons Stocks are Better than 99 Year HDB

Recently, we suddenly start realising that upon reaching the end of our HDB 99-year lease, we are all going to lose our homes – the HDB goes back to the government and we are not going to be getting any money back.Suddenly, HDB feels like a rented apar…

We Don’t Lack Leaders, We Lack People With Empathy

What makes a leader? What makes a person a leader?We follow leaders because of many reasons; because they have a strong vision; because they are charismatic; because they inspire us to do great things; because of this and that.Great leaders like Steve …

Is Whole Life Insurance A Scam?

A lot of people have written a lot about the difference between the 2.So instead of comparing them again, we recommend you read the difference in the link below:The Case of Term vs Whole Life InsuranceInstead, I will go into the figures.Context:30-year…

5% Travel Insurance Discount with FWD

At Investment Stab, we are always finding ways to help you save money, earn money, earn more money, and learn about money.And we have just this offer right here today:5% discount on your insurance premiums with FWD Insurance!Simply click on the link be…

Differences in investing viewpoints for bonds and equities

Recently, Azalea Group has just released its Astrea IV Class A-1 bonds. It was widely marketed as the debt instrument which provides access to private equity investments. This was definitely confusing (at least for me) and here are the reasons.
Bonds and equities have different long-term investing objectives
Bonds are predominantly debt instruments while equity, regardless private or public, are stake holdings in companies. Debt is primarily raised externally with the purpose of investing in the company’s operations for higher future returns. Interest and loan repayment is required. Debt is classed higher than equity for repayment in the event of a default. While the risk of failure of loan repayment can be mitigated by securing the loan with collaterals (where the collateral can be sold in the event of default), the investment returns are still from the interest payments. Hence, simple judgement of attractiveness of a bond is based on the underlying company’s ability to pay (risk) and the interest rate it is offering (reward). Investors should look for cash flow stability for company’s ability to pay.
Equity funding can be raised internally or externally with the similar purpose of investing in the company’s operations for higher future returns. However, the principal amount invested is not required to be repaid. Investors get their returns from the performance of the company through dividends issued or sales of its shares. As such, the attractiveness of a company’s equity is based on its probability of default (risk) and its business potential and performance (reward).
Why I am confused
While Azalea Group is a Private Equity firm, Astrea IV is a debt instrument which relies on Azalea Group’s cash flow for interest repayment. The attractiveness of this bond should be based on its relative interest rate offered and ifs underlying ability to pay the interest and principal loan amount. If the underlying private equity investments do perform better, the bond investors does not receive further benefits from the interest rate offered. In addition to this, even though Azalea Group is indirectly wholly-owned by Temasek Holdings, the bonds are not guaranteed by Temasek. 
While I understand that the rarity of these private-equity-backed bonds may be the reason of its attractiveness, getting exposure to Private Equity via debt instruments does not resonate well unless the debt instrument has an option to convert into equities or equity-related benefits. A better gauge of bond attractiveness will be to compare its relative default risk and interest rate among other bonds offered in the market.
Conclusion
The Astrea IV bonds have definitely performed well in the light of the positive marketing and its early performance (heavily oversubscribed). The purpose of this post is also not to discount its merits but to offer my 2-cents thoughts of how investors should differentiate the investment perspectives of an equity and debt instrument.

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SGX My First Stock Carnival (AKA Stock FunFair)

SGX will be holding a carnival this coming weekend at Vivo City!This event is suitable for those of you who are wanted to start their investing journey.Join us at this event to learn more about investing and how to start the journey.MOST IMPORTANT THIN…

Get $2 Cashback & More When Watching Avengers

Yes, movie promotions are here, and of course, it is for any movies, not just Marvel The Avengers Infinity War.This promotion is by DBS in conjunction with Golden Village (GV).Simply pay with DBS PayLah App when you buy your tickets at GV’s automated t…