By MARK FRYER
New Zealanders' love affair with fixed-interest investments has poured hundreds of millions of dollars into corporate bonds, capital notes, debentures and other variations on the theme.
Security and regular income are the big attractions, but there's a question for anyone contemplating such an investment: Just how safe is it?
With
some fixed-interest investments the question is easily answered, because they have a rating from one of the credit rating agencies such as Standard and Poor's or Moody's. If that's the case, investors know that a BBB-rated bond isn't as secure as one rated AAA, and needs to provide a higher return.
However, many investments are not rated, making it impossible for most of us to know how secure they are.
Now, a new service aims to take some of the guesswork out of choosing fixed-interest investments.
The Bondwatch ratings are offered by Wellington-based Grosvenor Financial Services, a company which provides services to the investment industry, such as research and administration.
The ratings are free and available on Grosvenor Financial Services website (click on "bondwatch", then "ratings" to see the actual ratings).
Grosvenor says the ratings aren't a matter of giving investments a pass/fail mark; it's more about finding an investment that matches an investor's willingness to take on risk.
Based on the information in investment statements and prospectuses, Grosvenor grades investments from G1 ("excellent ability to meet obligations, high level of security") through to G8 ("recommended for sophisticated investors only - the investment statement and prospectus are unlikely to contain sufficient information on which to evaluate credit risk").
Of the 36 investments on the list at present, only one scores a G1 category - UnitedNetworks' guaranteed fixed rate bonds.
At the other end of the scale, with a G8 rating, are St Laurence redeemable preference shares and mortgage bonds.
Grosvenor was already doing ratings for investment advisers, and decided to offer them to the public as well.
"Our advisers were continually coming to us and saying 'what do you think of this bond?', 'what do you think of that bond?', because there's very little information," says the firm's general manager, Mark Tume.
Grosvenor's chief investment officer, David Beattie, says the goal is "a totally objective framework that provides a relative assessment so that you can stack one up against another".
