The perfect asset allocation

Liontamer’s latest capital protected fund is a little different than earlier ones as it has traded off some of the “booster” performance for the ability to allocate the portfolio with “perfect hindsight”.

Friday, October 20th 2006, 1:48PM

Its recently launched Combi Series 3 is two funds which invest in an index that covers a range of commodities.

The index is made up of oil, aluminium, copper, nickel and soft commodities. Soft commodities is a bunch of agricultural products which are in fact another index, namely the Goldman Sachs Agricultural index which is made up of wheat, corn, soybeans, cotton, sugar, coffee and cocoa.

What is different about this fund is that its allocation to these five commodities is being made retrospectively.

Liontamer will have a 30% weighting to each of the three best performers, a 10% weighting to the fourth performer and no exposure to the worst performer.

“It’s like putting a bet on a race after the race has been run,” head of investment services Janine Starks says.

The ability to make allocations retrospectively is known as “rainbow” investing, or “perfect hindsight”.

Liontamer has been able to do this as it is buying a different credit linked note from investment bank Barclays, than it has used for previous funds.

Liontamer managing director Laetitia Peterson says the note is more expensive than previous notes, so there had to be a trade-off.

The trade-off in this fund is that the “booster” performance has been wound back to a lower level than previously offered.

With the booster performance investors get a return equivalent to more than 100% of the underlying index. In this case it is offering a fund with a four year term which pays the equivalent of 130% of the underlying index’s performance and another one which has a five year term but only pays 100% of the index’s performance.

For former also has protection of 90% of the investment’s capital, while the latter has 100% capital protection.

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