Happy New Year,
Please click here for last post on AFIG.
Here's a quick recap on how AFIG works:
- Pay a fixed coupon of $6.25
- Current price is $117.49
- Current yield therefore 5.3% p.a.
- Face value $100
- Maturity 28/2/17 (mature for $100)
- Investors can convert into ordinary AFI shares before maturity at a rate of $100/$5.09 = 19.6 AFI shares
At the time of my last review (May, 2013), the AFI share price was $5.72. It is now $6.08. So what this means is the conversion value of AFIG to AFI shares are currently worth 19.6 * $6.08 = $119.17; a small 1.4% premium to the current AFIG price.
The biggest risk, I think, is the AFI share price sags and AFIG shareholders basically lose $17.49 in capital value over the next few years until maturity. AFI is a very conservative listed investment company and is a loose proxy for the overall share market. Of course the stock market could go down over the next few years, however what I like is the limited downside in these notes.
The flip-side of course is full upside exposure to AFI. That makes AFIG an asymmetric bet and an interesting vehicle for people looking to bet the market is going up over the next few years but wanting to remove some downside exposure.
I'm personally chasing more alpha in my portfolio, however I can still see the case for AFIG in cash/fixed interest portfolios.
Kristian
Disclosure: no position in AFI or AFIG
