Kudy Eurobond Fund Series One

What is Kudy Eurobond Fund Series One?

We are launching our first ever product to the public. This is the Kudy Eurobond Fund Series One. This is the first of its kind to be made available for African investors who want to take a slice of the high Eurobond yields in African markets. The minimum amount required to buy most African Eurobonds is $200,000. Yes, that’s two hundred thousand dollars. Our desire is to ensure that you get access to this opportunity, at a minimal cost, by pooling your funds with us to buy these bonds.

There are many Eurobond Funds out there. They promise you competitive rates, but they do not disclose the price at which they purchase the Eurobonds they sell to you. We want to disrupt that model. We promise to be as transparent as possible. We will show you the Eurobond we have purchased and we will show you the price we purchased the bond. We will scour the whole of Africa to bring you the Eurobond with the highest yield that we can bet will pay you your coupons and principal whenever they are due.

The fees we charge for managing the fund is 1.5% per year. That is all. There are no hidden charges.

How much are we raising?

Now to the matter. We are raising $200,000 for our first Eurobond Fund Series. The minimum investment in the fund is $2,000 with multiples of $500 thereafter.

What is the rate of return?

The first benefit is that what you see is what you get. Our target for the first series is a minimum yield of 12% per annum — we believe we will get something higher, but we’d rather surprise you than under-deliver. Out of this yield of 12%, you will get a minimum coupon of 8% per year, which will be split into semi-annual payments i.e. two payments of 4% per year. You may be wondering what happened to the remaining 4% since we are promising a coupon payment of 8%. That 4% will be yearly capital appreciation on your investment, and this 4% will accrue on your initial investment only if you hold to maturity.

Now, let’s say you invest the sum of $10,000 in the fund. And the fund is invested in a Eurobond that will mature in 3 years from today (we estimate that the Eurobond we will purchase on your behalf will have a maturity of 2–5 years, so let’s take something in between those two extremes). You will get your first coupon payment in approximately 6 months after that (it could be less, but it will never be more). The first coupon payment will be 4% of your investment, which is $400 less 0.75% management fee of $75 for the first six months. This means you will receive $325 as coupon payment every 6 months. For three years, that will amount to a total of $1,950 you will receive as coupon payments. Now remember that there is another 4% capital appreciation that accrues to you on a yearly basis. Our management fee does not touch that. So, in addition to the coupons, you will receive principal payment of $10,000 plus $1,200 ($400 per year for 3 years) = $12,200. The total repayment you will receive on this investment will be coupons ($1,950) plus capital appreciation ($1,200) plus principal repayment ($10,000) = $13,150.

Remember that this is just a hypothetical situation, and we will do everything we can to beat this minimum return. If you translate this return in terms of Naira return, you will get it all wrong. Stay with me, I will explain it better.

So, what are the benefits of buying into this fund?

The main benefit is a two-layered protection from inflation. As we all know, inflation is pretty high in Nigeria because of speculative activities in the parallel market, which is the only source of foreign currencies for most Nigerians. By buying this bond, you are protected from Naira inflation, which, at the time of writing this, is running at 18.7%. This means that the average cost of goods and services in Nigeria has gone up by 18.7% over the past 12 months. Now, imagine if you were holding a dollar denominated asset, or even just dollars in cash, within the same period — you would have been able to maintain your purchasing power. That is just the first layer of inflation protection; let us take a look at the second layer. The dollar also has its own inflation! Inflation in the US is currently running at 2.5% per annum. That means that even people who are just holding dollars are losing value. This is where the second layer comes in. By buying into the Eurobond fund, you get a minimum estimated return of 12% per annum. This return generates an extra 9.5% over and above US inflation — this is what is called real return. The Kudy Eurobond Fund will provide you with a positive real return that is as close to double digits as possible. Not many investment opportunities provide this kind of protection in the world.

The second benefit is that you will be protected if the Central Bank of Nigeria decides to devalue the Naira (many of us are all hoping they don’t but we know the economy is struggling and they may be forced to).

Can I exit when I need my money?

You can liquidate part or the whole of your investment after the initial lock-in period of 12 months. We inserted this lock-in period for operational reasons. You know, we are currently small, but we want to provide you with the best of returns and customer service. During this period you will get regular updates about the performance of the fund.

However, you will not be allowed to hold less than $2,000 worth of investment with us. If you decide to liquidate, and the value of your holdings drop below this value, we will be forced to liquidate your entire holdings and send to you. Whatever coupon you have received will remain yours.

Another thing to note is that at the point of liquidation, the Eurobonds will be marked to market and you will receive your funds at the prevailing market price at which the Eurobond is selling. Because of the phenomenon called pull-to-par, you will most likely to get a higher principal repayment than initially invested because of the relatively short tenor of the Eurobonds, but there are no guarantees.

What are the risks of buying this investment?

Theoretically, no investment is risk free. However, we will do everything we can to keep the risk to the barest minimum by ensuring that we select only the Eurobonds that have been mis-priced by the market. We intend to scour the whole of Africa for the best of corporate and sovereign Eurobonds issued by entities that we believe will be able to pay coupons and principal as at when due.

Another risk is that we might just up and take off with your money. But that is never going to happen. Guaranteed. Kudy Financials Limited is backed by Dr. Manasseh Egedegbe. He holds the CFA Charter awarded by CFA Institute. So he has a lot to lose if we take off with your money.

Another risk is what happens in the unlikely event that Kudy Financials suddenly cease to exist for whatever reason? This has also been taken care of. The Eurobond will be held by a custodian, and a legal document will be provided for you to lay claim to the pro-rata value of the fund if Kudy Financials dissolves.

Okay, I am interested, What next?

We are glad you are interested in buying into this Kudy Eurobond Series One Fund. Just head over to our website.

You might be wondering if you can buy into this Fund if you do not have US Dollars. No worries, we will take the stress off you. You can invest in US Dollars, Nigerian Naira and Cryptocurrencies (we accept Bitcoins, Ethereum, Ethereum Classic, Litecoin, Monero, Dash and Ripple).

Please note that regardless of your mode of payment, all coupons and principal will be paid in US Dollars except you write to us beforehand. And your payment, if different from US Dollars, will be converted to US Dollars at prevailing “market” rates. Your funds will be sent back, less bank charges, if you send us any amount less than $2,000, which is our minimum acceptable investment.