Deposit Insurance
Many investors and clients from the US frequently ask us about Federal Deposit Insurance Corporation (FDIC) insurance. FDIC is best understood within the context in which it was created.
The FDIC was created in the United States as a result of the banking crisis of the 1930s. It is primarily designed to prevent a collapse of the banking system brought on by depositor panic. FDIC is not intended to reduce the risk of a bank’s investment policies, preserve capital, or guarantee interest payments. Many US banks have deposits that are oriented towards the short term and thus benefit from FDIC membership. Under a system like FDIC, banks are required to limit the majority of their assets in stable but low yielding instruments such as government bonds.
Free from the limitations of FDIC, Peter Newmann Investment Club has more flexibility in its investment choices. We can invest in a wider variety of instruments, such as AAA rated bonds offered through European companies, international real estate and business investments. This results in a portfolio that hedges risk through diversity. Simply put, The Peter Newmann Investment Club invests in similar vehicles as US banks but can offer more attractive returns and better manage risk through global choices.
Peter Newmann Investment Club and most other banks invest in similar asset classes. For example, many banks offer home mortgages, which are essentially real estate investments. In the United States, banks are primarily limited to mortgages on real estate in the United States. We also invest in real-estate backed mortgages, but we can invest in mortgages in international markets where these mortgages pay higher interest than similar mortgages in the United States. Therefore, with its global network, Peter Newmann Investment Club invests in similar assets but delivers higher returns to its investors.
As another example, many banks invest in government bonds. Specifically, many banks in the United States invest in bonds issued by the US, State, or Municipal Governments. Most of these bonds are A to AAA rated securities, or equivalent. We also invest in A to AAA rated bonds, but we invest in bonds in international markets where the coupon, or interest rate, are significantly higher than those paid by the governments in the US. Simply stated, with its global network, we invest in similar assets but delivers higher returns to its investors.
Finally, many banks offer commercial loans. A commercial loan is issued to a company and is essentially an investment in the assets of a company. Structured as loans, the investment returns are limited to the interest rate payable on the loans. Peter Newmann Investment Club also invests in companies. Following a stringent analysis, Tran structures investments into companies, but the returns are not limited to interest rates payable on loans. Therefore, with its team of experienced business leaders, Peter Newmann Investment Club passes on these higher returns to its investors while maintaining low risk profiles.