According to Wall & Smith, most of these syndication entities are no longer with us and unfortunately the hard earned capital - mainly needed by the elderly and retired who relied on better returns - has also vanished.
Greed is a word often used when the inevitable crash happens but in the case of most syndicate investors, being elderly or retired, their investments were driven by need.
The greed part came from so called financial advisers looking for high commissions.
An R 100 000 blue chip money market investment at 5% = R 5 000 per annum. Investors offered an extra 2.5% expect R 2 500 per annum more.
Tempted by an extra, possibly much needed R 208.33 per month, the ENTIRE R 100 000 investment is now at risk.
Protecting that hard earned capital is also a problem, generally not solved by a money market investment, as syndicates promised the added attraction of both income and capital growth.
Money market = secure investment, good liquidity, but lower returns and eroding capital.
Syndications = higher returns, high risk, possible capital growth, low liquidity.
There are alternatives:
Direct property investment. Not something we would recommend for elderly or retired investors. Costs of buying and selling can be high, needs experienced management, substantial capital outlay, generally low liquidity.
Direct investment in listed property. An investment in a single property fund may not provide a suitable spread, may require large sums of money, generally good liquidity and management. Capital and income growth.
Investment in a fund of funds. The sort of investment we would recommend. One can invest small amounts on a monthly basis, or bigger one-off investments diversified over the whole retail, office and industrial sector. Generally good liquidity and management. Capital and income growth.
Income to the investor could be interest or dividends.
The importance of a comprehensive analysis of the investor’s requirements in terms of the age of the investor, the income and capital growth needs cannot be over emphasised.
A properly structured, safe and secure investment would have been a better alternative to a syndicated investment.
With the demise of so many syndicated investments, had the investor’s capital at the very least been in a safe haven, it would not have vanished altogether.
Publisher: eProp
Source: W&S
