Astrea VI Bond — What You Should Know About this Private Equity Bond

Not unlike a Marvel Cinematic Universe franchise, Astrea bonds are a near-annual affair and almost guaranteed to be a hit among investors in Singapore.

In 2018, Singaporeans snapped up Astrea IV bonds like there was no tomorrow. In 2019, we gobbled up its sequel, Astrea V.

And after a one-year break to deal with COVID-19, the latest iteration, Astrea VI bond, is now open and looks set to be another box office smash. The Astrea VI bond is offering $250 million in its IPO, which is from now until 16 March 2021, 12pm.

If you’re reading this going “Ass-what again?”, here’s a primer to get you up to speed on the new Astrea VI Bond.

What’s the backstory with Astrea VI bonds?

Don’t know what the fuss is about? A little flashback is in order:

In June 2018, a little thing called Astrea IV bonds became available to regular Singaporean investors like you and me. This was a pretty big deal back then, because before Astrea IV, there were very few ways to invest in bonds other than buying Singapore Savings Bonds.

Well, Astrea IV turned out to be a crazy huge hit. Its initial public offer of $121 million was 7.4 times oversubscribed!

After Astrea IV, a few more high-profile retail bond options like the Temasek Holdings bond and Singapore Airlines bond popped up as well.

But they paled in comparison to the Astrea V bond, which was released a year later to similar fanfare. Its IPO of $180 million was 4.5 times oversubscribed.

As the highly anticipated follow-up to the breakthrough Astrea bond series, the Astrea VI bond features much of the same merits.

Er… But what’s a bond?

For the uninitiated, a “bond” is sort of a loan, but in reverse.

When you borrow money from a bank, you pay them back with interest, right? When you purchase a bond, you become the moneylender. You lend money to a company or government, and (if all goes well) they return your money in full, with interest.

In the case of Astrea VI, the promised interest is an eye-popping 3%. Try beating that in today’s crappy interest rate environment.

Oh, but that’s not all. Actually, the main reason why everyone steam over Astrea bonds was that the parent company of the bond issuer is none other than Temasek Holdings, which makes investors feel extremely confident that they’ll get their money back.

Because Temasek Holdings leh. They cannot die one.

… Even though Temasek Holdings doesn’t have anything to do with how the bond’s funds are managed — that’s totally taken care of by their subsidiary, Azalea Asset Management. 

The actual issuer of the bond is Azalea’s subsidiary, Astrea VI Pte. Ltd., so it’s twice removed from Temasek Holdings.

Are Astrea VI bonds’ 3% returns really that good?

You might have scoffed at a mere 3% interest rate a few years ago, but, dude, have you looked at your savings account interest rates lately? Or fixed deposits or Singapore Savings Bonds?

None of them even come within kissing distance of 1%. So yeah, a 3% return rate is insanely good. FYI, here’s a brief history of Astrea bond return rates:

	Interest rate (first 5 years)	Subsequent interest rate
Astrea IV Bonds	4.35%	5.35%
Astrea V Bonds	3.85%	4.85%
Astrea VI Bonds	3.00%	4%

Astrea bonds all work the same way: You get the promised interest rate during the first 5 years.

On 18 Mar 2026, about 5 years from now, the bond matures. That means Astrea, the borrower, will have to “O$P$” if they have enough cash to redeem the bonds and no outstanding debt. And you, the lender, will get your capital back.

But… If Astrea has done poorly and there are (gasp) cashflow problems, you might not be able to get your principal back at this point.

If this is the case, the interest will go up by 1% (so, 4%) all the way until the final maturity date, 18 Mar 2031, i.e. 10 years from now.

Are Astrea VI bonds risky?

All Astrea bonds feature ultra-diverse and hence low-risk portfolios. 

In the case of Astrea VI, the underlying funds are diversified across 802 companies around the world, across different sectors — the chances of all 802 companies going down in flames at once are very, very low.

That said, the risks are real when it comes to bonds, just like with any other investment instrument. You’re lending your hard-earned money to companies you have never heard of, and have absolutely no way to know what on earth they’re doing with it.

Also, understand that interest payouts and the principal investment are both not guaranteed.

There’s a chance you can lose money, so please, please don’t put your life savings into this — no amount of private messaging Ho Ching on Facebook is going to make her pay you back out of her own pocket if you lose money. (And she’s leaving anyway.)

Bottom line: Astrea VI bonds are very low risk, but the risk is still there.

So are Astrea VI bonds worth investing in or not?

In my totally amateur, don’t-take-my-word-for-it, ultran00b opinion, the Astrea VI bonds are definitely worth considering, for 3 main reasons:

• 3% p.a. returns 
• Relatively low risk (due to excellent credit rating & diversification)
• Low barriers to entry & exit

Let’s talk about the promised 3% p.a. returns. I’m pretty sure some people would snort and say, “pui! I can make 30% a year from my crypto investments.”

But that’s a whole different ball game — the high returns go hand-in-hand with the high risk nature of such investments. You can’t expect that kind of outcome from a relatively low risk investment like the Astrea bonds.

Where else would you go for an interest rate like that? Definitely not the beginner investments like fixed deposits or Singapore Savings Bonds, which don’t even come close to 1% p.a..

How do you buy or sell Astrea VI bonds?

We’re guessing that Astrea VI will be even hotter than the previous editions, because we’re currently getting very lousy interest rates elsewhere.

So if you want to buy Astrea VI bonds during the IPO, here’s what you need to know/prepare:

• Minimum investment is $2,000 (in multiples of $1,000)
• You need to a CDP account that is linked to a bank account with DBS/POSB, OCBC, or UOB
• You can apply via ATM, iBanking, or mobile banking
• Application closes on 16 Mar 2021, 12pm

There is theoretically no cap for how much you can invest. We recommend you apply to invest up to $50,000 — you’ll get either the full amount or partial (if the bond is oversubscribed and there’s not enough to go around).

If you try to apply for more than $50,000, you will end up in a ballot similar to HDB BTO balloting. Only selected “winners” will get their bonds. So there’s a chance you will be rejected entirely.

The bond will be issued on 18 Mar 2021 and you’ll get the results then.

Didn’t get the full amount you’d hoped for? It’s OK — you can buy and sell Astrea bonds on SGX when it becomes listed on 19 Mar 2021 onwards. But since it’s on the “open market”, the price can dip or rise.

Should you need to liquidate your investment at any point, it’s possible to do so by selling your bond on SGX, like you would any other stocks on the market.

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