Bonus Bonds are a New Zealand icon, with investments of over $3.1 billion. Basically Bonus Bonds are a unit trust, run and administered by ANZ. Each month prizes are allocated to some lucky unit holders from the income generated by the billions invested. Unfortunately the chance of winning is about 30,000/1. Good if it works and you are one of the $1 million winners, but not so good if you aren’t.
The prize pool is calculated by taking the income generated and deducting ANZ’s slice. Last year the after fees and expenses allocated to the prize pool equalled 2.03% on the fund and ANZ deducted 1.28%; not a great investment considering if you put the whole $3.1 billion on term deposit for twelve months, you could get a guaranteed 4.4% return. It seems Bonus Bonds are great for ANZ and not so great for the majority of their investors.
But wait there’s more … investor’s capital isn’t guaranteed and Bonus Bond units can fall below a dollar and ANZ can charge withdrawal fees.
Anyone holding or thinking of buying Bonus Bonds should visit bonusbonds.co.nz/prospectus, and do some homework.
History has shown that often iconic brands and investment products can morph into something completely different over time and this has caught many people out over the years.
Our advice is to be an informed investor – avoid the simple mistake of not knowing where your money is.