Astrea IV Retail PE Bond For Retirement?

Last updated on June 18th, 2018 at 05:52 pm

News came through that the Astrea IV Retail PE Bond was oversubscribed by 7.4x! 65 per cent of the bonds were allocated to applicants who subscribed for $30,000 or less, with all those applying for $4,000 or less receiving full allocations. I have never seen such an allocation before for IPOs.

From rough estimates, there should be at least 23,000 to 25,000 who applied for the IPO with less than $30,000. With the market opening at a 3% gain, that’s not too bad a small windfall to many.

 

Some quick facts about this bond 

– How much does the bond provide: 4.35%p.a till 14june2023. Coupon divided half yearly each.

– What happens after 5years: May be redeemed by Azalea Asset Management or you will 1%p.a more coupon payments. Latest by 14June2028 will mature.

– Who is Azalea Asset Management: Wholly owned subsidiary of Temasek holdings. Hence “Temasek Holding’s first retail private equity bond” is correct.

– So it’s guaranteed by Temasek: No. Although Temasek’s and Ms Ho Ching’s reputation seems to be at stake if it defaults.

– What does the bond invests in generally: Funds which invest into about 600 non-listed companies. Top sector holdings is in IT (23%). Details in the complex chart below

 

Ms Ho Ching openly endorsed it by saying “investors can invest in Temasek Holding’s first retail private equity bond to supplement their retirement income

 

Is it suitable for retirement? Should your mum and dad buy it too?

I handle retirement questions quite frequently in the course of my work. In my opinion, the two key main factors to decide if a product/strategy is suitable for retirement income

  • is the capital safe (because in retirement you are “deccumulating” and losses can erode your capital quickly. There has been extensive research on this topic)
  • are the returns enough against inflation (inflation can “deccumulate” your retirement pot subtly)

 

I’ve created this chart to position the Astrea IV bond against some assets for retirement income

 

PS: As you can see, it would it would be silly to invest in high risk ideas with low returns and are no guaranteed principle high returns ideas. Hence, I removed them out.

 

Quick conclusions

Personally, I view this Astrea IV bond in a unique space of at inflation return + unlikely to lose capital. I would favour buying it (rated A by Standard and Poors’) against other individual retail bond because it is much more secure.  However, I do remember that CDO’s (who were also highly complex) were also deemed to be “safe” before the global financial crisis hit.

In retirement, diversification is crucial. You never know what may go wrong. No individual asset should hold too much of your wealth. As Ms Ho Ching said, “Supplement” your retirement income will do.

 

Image credits: https://www.astrea.com.sg/a4/

 

Josh Tan

As a dad now, I have a new found perspective on financial matters concerning parents. I share many of the concerns that you have and as I search for answers myself, I'll share them through my articles. Being keen on investing and personal finance matters, I started a journey in the financial planning industry and have been blessed to share what I am passionate about for the last 10 years.