The last great post-crisis credit trade

This obscure investment could yield 9.5% - if you know where to find it.

I wrote here about last week's Sohn conference and the many stock and market tips that came out of it. I didn't cover them all in the first column, so this is just a quick post to run you through some of the rest.

The first speaker, Julian Sinclair, tipped Tata Motors. That was interesting if not particularly scintillating. But his second tip was a gripper. There is, he said, "one last great post-crisis credit trade." That perked the room up. It is shared appreciation mortgages', or SAMs.

We've written about these before from a different angle, but older readers will remember how, back in the early 1990s, a time when house prices hadn't been booming, banks offered and people accepted deals by which they borrowed money against their houses and paid no interest on the loans. Instead, they agreed to share any capital gains made on sale with the bank in varying ratios.

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At the time, this seemed like a high risk deal for the banks and a low risk deal for the property owners. Now that isn't so much the case SAMs have turned out to be a great deal for the banks and a really rubbish one for the borrowers.

What's more, there are still SAMs knocking around in securitised form, offering, says Sinclair, pretty fabulous potential returns. The bonds are so low risk that he reckons they should be yielding 4-5%. Instead they are yielding more like 9.5%.

I reckon there is more risk in this than he thinks the politics of forcing someone to hand over 50%-plus of the new value of their home on its sale won't work for the PR departments of our increasingly despised retail banks but I still think he makes a good investment case for looking at SAMs. I just don't know how retail investors get into them. Anyone else?

Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.