Risk barometer to measure income returns

Liontamer has launched its first capital protected fund which is targeted to compete with more traditional forms of fixed interest such as secured debentures.

Tuesday, April 27th 2004, 11:06PM

The Moneyfund is a closed end vehicle with a five year term and is expected to give investors a 7% annual return, plus a kicker which is designed to increase the annual return to 12% annually over the term of the investment.

The fund is quite different to other income offerings in the market. Essentially Liontamer is buying a structured note issued by Deusche Bank which invests in the bank’s Dynamic Carry Index which makes gains from movements in currencies and interest rates around the world.

Liontamer head of investment solutions Janine Starks describes the fund as one which chases yields around the world.

It invests in countries which have high interest rates and then borrows from other countries that have low rates.

Money flows into countries which have high interest rates, which also has the added affect of pushing up the currency. When the market turns the money leaves and goes to safer havens.

Starks says the fund isn’t invested on the daily whims of fund managers. She says Deusche Bank has developed what it calls a risk barometer which calcuates the risk of each market daily. Changes to investments are made on the barometer’s results.

She describes it as a passive and highly structured approach.

The fund has a pool of 10 currencies to invest in but only invests in six at a time (three investments and three borrowings).

The fund doesn’t actually invest in fixed interest securities rather it buys forward exchange contracts.

Like all Liontamer products this fund is capital protected. The protection is provided by Deusche Bank which has an AA- credit rating.

Liontamer’s investor relations man Neville Giles says the biggest issue for investors is making sure they are comfortable with the capital protection – namely Deusche Bank’s rating as the underlying note is essentially an unsecured debt security issued by the investment bank.

Additional features of the fund are that: Investors have the ability to exit early – at a cost, the fund has a 2% embedded commission paid to advisers and there is another 3% entry fee which is fully rebatable, if exceptional returns are made investors receive their money back early.

Liontamer’s other fund in the market at the moment is its EASYgrow 100. This is a capital protected fund whose return is based on the MSCI share index. Liontamer head of distribution Michael Lodge describes it as the best of the seven equity based funds rolled out so far. The closing date has been extended to May 11. For more information see this month’s SPECIAL REPORT here.

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