Welcome to ANZ’s introductory guide for Australian retail investors on Australian bank hybrid securities or “Hybrids” (which are also referred to as capital notes or convertible preference shares and are “Additional Tier 1” securities for regulatory purposes).
This will help step you through the important issues and risks that you need to be aware of and consider before you make any investment in Hybrids and will introduce you to terms and concepts used in relation to Hybrids and by financial advisers.
It is not designed to be a guide for any other bank investments, such as subordinated notes (also referred to as “Tier 2” securities for regulatory purposes) or ordinary shares.
Hybrids are complex and each Hybrid is different. Hybrids may not be suitable for all investors. The risks associated with Hybrids could result in the loss of your investment and associated income and the investment performance of Hybrids is not guaranteed.
This website is for informational purposes only and addresses only some of the features and risks associated with an investment in Hybrids. It does not contain investment advice and its content has been prepared without taking into account any investor’s objectives, financial situation or needs.
Before investing in a Hybrid, it is recommended that you seek professional guidance which takes into account your particular investment objectives and circumstances from a professional adviser who is licensed by ASIC to give such advice.
What you should do before you invest?
1. Read the relevant Prospectus in full
The terms of each Hybrid are different and so it is important that you read the information in the relevant prospectus in its entirety before deciding to invest.
The prospectus for a Hybrid issue will generally be published the bank’s website and on the ASX.
In considering whether to invest in a Hybrid, it is important to consider all risks and other information regarding that investment in light of your particular investment objectives, financial situation and needs and circumstances, as the information in the prospectus will not take into account those objectives and circumstances.
2. Obtain advice as to whether the Hybrid is suitable for you
Hybrids are not suitable for all investors. Since 5 October 2021, an issuer of a Hybrid has been obliged to determine the class of retail investors for whom the acquisition of a Hybrid when it is first issued is likely to be consistent with the likely objectives, financial situation and needs of a person within the class (the “Target Market”). The Target Market for the issue of the Hybrid will be described in the prospectus and in a document called a “Target Market Determination”, which the issuer must make available to the public.
If you are a retail investor and wish to apply for a Hybrid, it is important that you are within the Target Market. You should not apply for the Hybrid if you are a retail investor and are not within the Target Market. You should seek professional advice as to whether you are within the Target Market and the investment in the Hybrid is suitable in light of your particular objectives, financial situation and needs.
If you are a retail investor and are considering acquiring a Hybrid that has already been issued (for example, by purchasing it on ASX), we also recommend you seek professional advice as to whether the Hybrid is a suitable investment for you.
Professional advice from a person who is licensed by ASIC to give that advice. ASIC has published guidance on how to choose a professional adviser on its MoneySmart website. You can also search ‘choosing a financial adviser’ at www.moneysmart.gov.au.
3. Consider the ASIC guidance for retail investors
ASIC has published guidance on Hybrids and other similar securities on its MoneySmart website which may be relevant to your consideration of an investment in Hybrids. The guidance includes a series of questions you should ask before investing in Hybrids.
4. Obtain further information about the issuing bank and the relevant Hybrid
Bank issuers of Hybrids typically publishes information on the ASX which may have a material effect on the price of a Hybrid, including financial disclosures. You should consider reading this information before deciding to invest in Hybrids.