Discovering unconventional investments
FOREX
There have been years of consistent profitability through trading major currencies on the FOREX (FOREIGN EXCHANGE) The FOREX market is a multi trillion dollar a day exchange between banks, corporations and individuals. It is a near-seamless 24-hour market, but is subject to available liquidity. With the ability to trade around the clock, currency traders have the advantage of customizing their own trading schedule; they can usually get in or out of the market at any time without waiting for an opening bell or encountering a market gap like the other exchanges. By leveraging and compounding, many FOREX investments can give your higher than average returns.
Prior to 1997, it was only available to high net worth individuals, however, with the expansion of the Internet and technology, it has now become more mainstream. Although they can be perceived riskier, these investments often generate higher returns than traditional investment vehicles.
Medium Term Notes
In the past decade, the continuously offered Medium Term Notes has been one of the fastest growing segments of the debt markets. Typically available to only high net worth individuals, special offerings are becoming more and more available to the average person.
A Medium Term Note (MTN) is a debt note that usually matures (is paid back) in 5-10 years, but the term may be as short as one year or as long as 50 years. They’re normally issued on a floating basis such as Euribor +/- basis points. When they are issued in euro they are “Euro Medium Term Notes”.
The notes are usually connected to a Medium Term Note Program, which is a funding program used by issuers to receive bond debt funding on a regular and continuous basis. Their programs can include more than one issuer although the issues are independent up to a maximum amount authorised. The advantage to issuers is that they are not required to produce a full suite of legal documents each time they want to issue notes. Instead, a series of underlying documents are amended with each issue by a pricing supplement which sets out the terms of each specific issue of notes. This makes access to debt funding easier and cheaper. Programs are registered in a supervisory authority such as the London Stock Exchange and the Luxembourg Stock Exchange.
Most large companies have established Medium Term Note Programs to finance their medium term financing needs. Countries also use these programs to access the capital markets.
Some issuers such as investment banks like Morgan Stanley and Merrill Lynch have adapted their Medium Term Note programs to issue more sophisticated notes such as securities linked to the share price of public companies (equity-linked notes) or the price of share indices such as the FTSE 100 or NASDAQ (index-linked notes). (http://en.wikipedia.org/wiki/Medium_Term_Note)
In the past decade, the continuously offered Medium Term Notes has been one of the fastest growing segments of the debt markets. Typically available to only high net worth individuals, special offerings are becoming more and more available to the average person.
Medium Term Notes are debt instruments that are issued in the same form but through a different mechanism than other types of corporate, financial institution or government obligations. The feature that primarily distinguishes the traditional debt issues from MTN’s is that MTN’s are offered continuously through agents or dealers on a best efforts basis, rather than on a firm commitment (underwritten) basis. MTN’s are issued with a variey of interest payment schedules that range from traditional semi-annual payments to custom-tailored frequencies such as monthly, annual or compounded at maturity.
Limited Partnerships
Limited Partnerships are another interesting investment vehicle. A limited partnership (LP) consists of two or more persons with at least one general partner and one limited partner. While a general partner in an LP has unlimited personal liability, a limited partner’s liability is limited to the amount of his or her investment in the company. LP’s are creature of statue since they must file with the province to form them and because of the limited liability of limited partnerships, they often are used as vehicles for raising capital. The limited partnership is a separate entity and files taxes as a separate entity. There are three distinctions between limited partnerships and general partnerships,. They are:
1. LP’s are created by statute, not by intentions of the partners
2. Ability to override the partnership agreement
3. Tax treatment- a limited partnership normally has pass-through taxation, but must meet certain criteria to avoid being taxed as a corporation
As in a general partnership, income can be allocated each year among the partners in a way that minimizes taxes. If the limited partnership meets a minimum number of criteria related to limited liability, centralized management, duration and transferability of ownership, it can enjoy the benefits of pass-through taxation (flow through) otherwise it will be taxed as a corporation. The limited partner interest is considered a security by law. It can be transferred to a third party, but general partners and limited partners have the right of first refusal.
