Endowment warrants, popular with mum and dad investors until torpedoed by tax changes, are making a comeback of sorts.
Macquarie Bank is offering five-year "self-funding" instalment warrants over blue-chip shares such as the banks, Telstra and Tabcorp , which, like endowments, virtually pay for themselves.
Aimed at DIY super funds, the longer than usual maturity date means the dividends and 30 per cent franking credits pay off the underlying 6.95 per cent interest rate on the 50 per cent borrowing.
Instalment warrants appeal to DIY funds as they are the only form of borrowing accepted by the Tax Office.
Because of the low interest rate and high dividend yields, the self-funding instalment warrants are expected to have a reduced second payment.
Dividends are used to reduce the loan amount and interest is added once a year. Franking credits are passed on to investors.
Instalment warrants trade on the stock exchange like shares.
