Each listed income investment under coverage is assigned either an ‘Approved’ or ‘Not Approved’ rating:
The ‘Approved’ rating indicates that Lonsec believes the security is of ‘Investment Grade’ quality, meaning we believe the security will pay all distributions in the term to call and holders will receive face value on maturity, such that the income potential outweighs the potential risks.
The ‘Not Approved’ rating indicates that Lonsec believes the security is not of ‘Investment Grade’ quality, meaning we believe the potential risks outweigh the long term income potential of the security.
These recommendations are made with reference to the Lonsec risk assessment (more details here) and with consideration to the relative attractiveness of the expected return. The potential return refers to the interest margin on offer over the relevant benchmark rate and any other investment return which may include conversion discounts, in-built call options, entitlements to IPOs and future step-ups in the margin.
Refer to the methodology document for further information...