Wednesday, December 24, 2014

LP bonds 2014 results

This is the time to distribute coupons for my LP bonds back to my parents. For those who are scratching their heads, here's the prequel for this post.

There are two tranches for the bond:

1. LP bond 50k

Starting capital: 50k
Invested capital (inclusive of comms): $49,773.02
Cash accumulated from payout of holdings: $2,144
Paper gain (loss) from drop in market price of holdings: ($748.02)
Total portfolio gain (loss): $1,395.98
Total portfolio % changes: 2.79%

Going forward, since it's a capital guaranteed bond (by me, of course), I need to retain a certain amount of cash in case my parents need to liquidate it. I'll pay 70% of the net portfolio gain or 2% of 50k (which is $1000), whichever is higher. That should be the policy going forward.

70% of $1,395.98 is $977.19, which is lower than $1000, so I'll just pay out $1k for this tranche.

2. LP bond 60k

Starting capital: 60k
Invested capital (inclusive of comms): $59,699.66
Cash accumulated from payout of holdings: $2184.94
Paper gain (loss) from drop in market price of holdings: ($498.66)
Total portfolio gain (loss) : $1,686.28
Total portfolio % change: 2.81%

Cash payout so far: $600

For this bond, it's a semi-annual payout. I've already distributed $600 in the middle of this year. Going by the same policy of 70% of net portfolio gain or 2% of 60k ($1.2k), whichever is higher,

70% of $1,686.28 = $1,180.40, which is lesser than $1200, so I'll just pay out $1.2k. However, I've already distributed $600 earlier, so this time, it's only another $600.

It's not easy to run a fund that promises a guaranteed payout of a fixed percentage and yet there's capital guaranteed. The returns are not fantastic, but I must remember what the risk profile of my parents are and what are their goals. They initially just wanted to get into a fixed deposit, which pays about 1.2% or 1.3% at that time but I thought they are not doing their money justice. Hence, I offered to do this for them. Hence my benchmark should be the long term fixed deposit rate. As long as I can do better than the fixed deposit rate, I should run it for them, if not, I might as well cash out, have less trouble and not bounded by my own guarantee!

They are still interested to invest with me (another 100k plus minus!), but too bad, closed shop liao. LP guaranteed bonds is officially over! If they want to invest with me, it'll be LP equity fund LOL! Equity funds means bo bao capital, and if the market tanks, they will bear the loss. I need to highlight that to them haha :) For LP bonds, it's low guaranteed returns and capital guaranteed, maybe for LP equity funds, it'll be medium guaranteed returns but no capital guaranteed...see how lah


Sillyinvestor said...

Hi LP,

Er... If your parents really participate in LP equity fund, think it will be more scary. I think the counter-party, bully the bear limited, might have to bail out investors to prevent social unrest in the case of big ugly bear. Remember the mini bonds saga?

Be careful what you wish for.

Merry Christmas. Ho ho ho.

la papillion said...

Hi SI,

That's why I must make sure they understand the terms that if they want higher returns, don't expect a guarantee. Knowing them, I'm quite sure they won't do it..but I could be wrong. The portfolio is even higher than mine, how to guarantee them further? Lol

Btw, I directed some of the new funds, rejected them, and asked my parents to put in the dbs/posb 1.5% promo, haha :) will lock them up for 6 months, then we see how

Money Honey said...

For a plain vanilla fixed deposit, which is not linked to any minimum spending limit and step-up t&c then the additional payout amount (of 0.50%) in LP Bond has the highest market-beating rate.

Capital 50k
750 Bank FD 1.5%
1000 LP Bond 50k
250 Extra
0.50% Extra

Capital 60k
900 Bank FD 1.5%
1200 LP Bond 60k
300 Extra
0.50% Extra

For a FD, earlier withdrawal before maturity means losing all the fd interest amount and a few banks even charge for an earlier account closure. Now, beat that.

Money Honey said...

LP Equity fund or LP Unit Trust fund will different. Higher payout with higher risk and is non-capital guaranteed. Worth it or not? LP Bond is a better option. said...

Hi LP,

Job well done. Your parents will be pleased.

Wishing you and your family a Merry Christmas and a blessed new year.

la papillion said...

Hi Money honey,

Thanks for the encouragement :)

I also think they wouldn't want the equity fund, haha! But LP guaranteed bonds are no longer in issue, and is likely not going to have new issues anymore :) Seriously closed shop liao!

I'm looking forward to the day that

1) SG bond retail market is more matured, meaning that I will have more options and also do not require 1/4 million dollars to invest in good quality corporate bonds.

2) The lot size will be reduced from 1000.

That will certainly be another alternative to self-employed like me, trying to re-create CPF-like fund for retirement purposes.

At least wish no.2 is coming true :)

la papillion said...

Hi Derek,

Haha, thanks bro :) I don't think they have high expectations of the fund. They always stressed to me that as long as the capital is intact, it's ok. I don't think they really 'see' inflation eating up their savings. Oh well, it's up to me to help them out as best as I can.

Singapore Man of Leisure said...



The bonds between you and your parents ;)

Is it raining in Bedok? Queenstown is raining cats and dogs now.

Got the Christmas mood! Happy :)

I'm good since I'm home now.

Those preparing to go to Christmas parties may not like it... Rain rain don't ruin the hair!

la papillion said...


Heard you have to work on public holidays? :) Well, I'm in the service industry too, I understand how it feels. Usually I also work on public holidays (even harder than usual!), but not on xmas this year :)

I wish you good health and happy returns in the new year 2015 :) Have yourself a great xmas serving pple!

B said...


Good to see LP bonds doing well.

I may have missed this but can I ask what do you do with the 100k deposited with you from the parents. Do you invest it in riskier asset returns but still the amount of returns you will return is guaranteed by you?

I guess blood is thicker than anything else. They will be happy to see it grow faster than the fd.

la papillion said...

Hi B,

No lah, I no longer am able to guarantee their capital because their invested money is getting bigger. The capital requirements to guarantee that amount will upset my own balance sheet!

I rejected them a few times. Some part of the money I asked them to put it in the DBS/POSB 1.5% deposit. I haven't told them of my plan to put their money into a bond/equity portfolio where I won't be able to guarantee the capital, but they will likely get higher returns. OR maybe I can set up the same bond/pref shares portfolio, continue giving them at 2% fixed returns but no longer guarantee the capital.

See what they want lah. I haven't really discussed with them. I really really reluctant to invest their money for them lol