i have read the PDS for the income fund and here are some points you may not be aware of.
firstly, traditional income funds usually only invest commercial loans, other fixed intruments and cash.
MFS's Income Fund is different in that it aims to provide investors with a higher rate of income that the traditional funds. This is the major selling point of the fund and why it now has around $750m in it.
Secondly the cash that investors pump into the fund is lent out to borrowers in some instances where they cant get normal financing because of their balance sheets etc or because the asset they want to use as security has been rejected by other lenders.
The third and most important issue is that the income fund actually invests into property, that is a direct investor in property.
The fund seeks to guarantee an income return, if there is any capital gain etc MFS keeps the extra profit. So you have a situation where investors funds are being worked a lot harder than they think (ie higher risk) and MFS keeps most of the benefits. MFS guarantees the rate of return above the benchmark rate as well.
So if the property market slows and some of the lenders the fund has lent money to cant repay MFS is liable.
You might ask how i know this? I spoke to a business development manager about the fund a few months back. He went over everything in detail, ie the loan structures and property exposure. No wonder most of the funds that have been invested in this fund have come from direct marketing to retail investors, they dont know what they are getting into!!!
So those of you out there that think this fund will come out of this looking rosy, you are mistaken. When the funds start coming out of the Income Fund MFS is going to be resposnible for funding the shortfalls.
I suggest you get a hold of the PDS and have a good read, then you will fully appreciate how intertwined this fund is with MFS and all its other vehicles. When the cash starts to gush out of this fund MFS will be a the sh*t bigtime.
Read the PDS before you say i am negative and then come back and talk to me.
MFS
mfs limited
