Westpac's $1.32bn lemon hitting retail punters

Christopher Joye

Coolabah Capital

In this AFR column I note that my 22 July analysis headlined "Westpac's hybrid deal a dud" annoyed both the bank and the many folks spruiking the overpriced Westpac Capital Notes III (WBCPF) security to naive investors in exchange for 100 basis point commissions. Yet, based on the searing 3 per cent capital losses the supposedly safe hybrid has imposed on investors since its listing on Wednesday, my conclusion that it was "equities for dummies" was spot on. Pity the $1.32 billion of retail money that was cajoled into the issue on the basis of an advertised "6.7 per cent yield to maturity". WBCPF is a "perpetual" equity instrument that actually has no maturity at all and only pays a discretionary (not legally binding) dividend (not interest) of 4 percentage points above the 2.17 per cent bank bill rate. So the total expected annual income at the time it was launched was 6.17 per cent, not 6.7 per cent. Investors in the original issue will now earn a total return of less than half what they were marketed...(VIEW LINK)


Christopher Joye
Portfolio Manager & Chief Investment Officer
Coolabah Capital

Chris co-founded Coolabah in 2011, which today runs $7 billion with a team of 33 executives focussed on generating credit alpha from mispricings across fixed-income markets. In 2019, Chris was selected as one of FE fundinfo’s Top 10 “Alpha...

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