Invest
Be wary of ‘hard-to-understand’ products
Ten years on from the global financial crisis, investors are being warned to be cautious of buying into products which are difficult to make sense of.
Be wary of ‘hard-to-understand’ products
Ten years on from the global financial crisis, investors are being warned to be cautious of buying into products which are difficult to make sense of.
Shane Oliver, the leading economist at investment firm AMP Capital has urged investors to be careful when investing in products created through “financial engineering” or which are hard to understand, noting similar products played a key role in the GFC.
“The GFC was the worst global financial crisis since the Great Depression,” he said.
“It saw the freezing up of lending between banks, multiple financial institutions needing to be rescued, 50 per cent plus share market falls and the worst post-war global economic contraction.”
This was spurred on by a “massive easing” of lending standards, allowing people to receive loans they were unable to service and packaging these loans with other loans to create securities to be sold to investors, Mr Oliver explained.
These products were then given good ratings as a low-risk investment “on the basis that while a small proportion of loans may default, the risk will be offset by the broad exposure”, and then sold to willing buyers under “fancy names”.
Not only did these products play a role in bringing about the subsequent crisis (which occurred after the US central bank drastically increased rates, leaving many people unable to pay their mortgages), but investors who held these particular products were also the most badly affected.
“The biggest losses for investors in the GFC were generally in products that relied heavily on financial engineering purporting to turn junk into [well-rated] investments that were impossible to understand,” he said.
Mr Oliver acknowledged that any potential future market crisis is unlikely to take the same shape as the GFC did, but warned there will be similarities.
“Of course there will be another boom and bust… but as Mark Twain is thought to have said ‘history doesn’t repeat, but it rhymes’ so the specifics will be different next time,” he said.
RELATED ARTICLES
Property
Gen Z's secret weapon: Why their homebuying spree could flip Australia's housing market
A surprising share of younger Australians are preparing to buy despite affordability headwinds. One in three Gen Z Australians intend to purchase within a few years and 32 per cent say escaping rent ...Read more
Property
Tasmania’s pet-positive pivot: What landlords, BTR operators and insurers need to do now
Tasmania will soon require landlords to allow pets unless they can prove a valid reason to refuse. This is more than a tenancy tweak; it is a structural signal that the balance of power in rental ...Read more
Property
NSW underquoting crackdown: the compliance reset creating both cost and competitive edge
NSW is moving to sharply increase penalties for misleading price guides, including fines linked to agent commissions and maximum penalties up to $110,000. Behind the headlines sits a more ...Read more
Property
ANZ’s mortgage growth, profit slump: why volume without margin won’t pay the dividends
ANZ lifted home-lending volumes, yet profits fell under the weight of regulatory and restructuring costs—an object lesson in the futility of growth that doesn’t convert to margin and productivityRead more
Property
Rate pause, busy summer: where smart capital wins in Australia’s property market
With the Reserve Bank holding rates steady, the summer selling season arrives with rare predictability. Liquidity will lift, serviceability stops getting worse, and sentiment stabilises. The ...Read more
Property
The 2026 Suburb Thesis: A case study in turning trend lists into investable strategy
A new crop of ‘suburbs to watch’ is hitting headlines, but translating shortlist hype into bottom-line results requires more than a map and a mood. This case study shows how a disciplined, data-led ...Read more
Property
From signals to settlements: A case study in turning property insight into investable action
Investor confidence is rebuilding, first-home buyers are edging back, and governments are pushing supply — yet most property players still struggle to convert signals into decisive movesRead more
Property
Australia’s rental choke point: why record-low vacancies are now a boardroom issue
A tightening rental market is no longer just a housing story—it’s a macro risk, a labour challenge and a strategic opening for capital. With vacancies near historic lows and rents still rising, ...Read more
Property
Gen Z's secret weapon: Why their homebuying spree could flip Australia's housing market
A surprising share of younger Australians are preparing to buy despite affordability headwinds. One in three Gen Z Australians intend to purchase within a few years and 32 per cent say escaping rent ...Read more
Property
Tasmania’s pet-positive pivot: What landlords, BTR operators and insurers need to do now
Tasmania will soon require landlords to allow pets unless they can prove a valid reason to refuse. This is more than a tenancy tweak; it is a structural signal that the balance of power in rental ...Read more
Property
NSW underquoting crackdown: the compliance reset creating both cost and competitive edge
NSW is moving to sharply increase penalties for misleading price guides, including fines linked to agent commissions and maximum penalties up to $110,000. Behind the headlines sits a more ...Read more
Property
ANZ’s mortgage growth, profit slump: why volume without margin won’t pay the dividends
ANZ lifted home-lending volumes, yet profits fell under the weight of regulatory and restructuring costs—an object lesson in the futility of growth that doesn’t convert to margin and productivityRead more
Property
Rate pause, busy summer: where smart capital wins in Australia’s property market
With the Reserve Bank holding rates steady, the summer selling season arrives with rare predictability. Liquidity will lift, serviceability stops getting worse, and sentiment stabilises. The ...Read more
Property
The 2026 Suburb Thesis: A case study in turning trend lists into investable strategy
A new crop of ‘suburbs to watch’ is hitting headlines, but translating shortlist hype into bottom-line results requires more than a map and a mood. This case study shows how a disciplined, data-led ...Read more
Property
From signals to settlements: A case study in turning property insight into investable action
Investor confidence is rebuilding, first-home buyers are edging back, and governments are pushing supply — yet most property players still struggle to convert signals into decisive movesRead more
Property
Australia’s rental choke point: why record-low vacancies are now a boardroom issue
A tightening rental market is no longer just a housing story—it’s a macro risk, a labour challenge and a strategic opening for capital. With vacancies near historic lows and rents still rising, ...Read more
