Kauri Notes generate 2.32% for quarter ended March 31, annualised return 14.13%
Subscribe before 24 April
A 2.32% return for Kauri Units over the March quarter has been a satisfactory performance.
The updated indicative comparisons with other asset classes over the quarter are set out below. It is clearly a time when the fundamental importance to “value-added” investment advice of ensuring that investor’s portfolios do not lose money is once again re-enforced.
2008 |
Kauri Notes |
NZX 50 |
NZ Cash |
NZ FI |
1 January to 31st March |
2.32% |
-9.98% |
2.21% |
1.91% |
During the month of March the Permal multi manager fund lost 1.9% as a short term reversal of market trends occurred late in the month. This reversal is well within the historical parameters of the fund volatility and is one element of monthly movements in NAV associated with continuing to generate the historical annual returns which have been achieved. The decline in the Kauri Notes is 2.6% due to the 35% leverage which had been accumulated from the past monthly NAV growth rates. The road to alpha generation must be bumpy from time to time.
In S&L’s 7 year back tested simulations the Notes and Kauri Income Units return between 11.2% and 17.8% annually.
One aspect of a Kauri Unit which provides advisors with the opportunity not to have their clients totally reliant upon the acceptance of credit risks in order to produce income and growth is a modest increase in monthly volatility. S&L suggests this is a small price to pay compared with the substantial benefits of the greater portfolio diversification which are delivered.
Recent experience would suggest that during periods of extreme financial market stress the pricing of all credit based instruments tends to be highly correlated.
An example of this is the increases in 10 year investment grade USD bonds (and all other credit instruments). The increase in yields - or the loss in value - of AAA, A, and BBB investment grade bonds as measured by the margin above Government debt is broadly surprisingly similar despite the material difference in historical default rates which underpin these different credit rated instruments. This is particularly the case between A and BBB securities
Since mid 2007 the AAA names have experienced a 1.15% increase in annualised margin over 10 years (loss in value); the A names have experienced a 2.35% increase in annualised margin over 10 years (loss in value) and BBB names a 2.5 % increase in annualised margin over 10 years ( loss in value). S&L imagines the similar results would apply to NZD debt securities.
The mainstream media is actually debating if the worse is over, if we have seen the bottom etc. From S&L’s perspective there is no inversion of trend to date in the updated financial market data as of Monday this week.
Subscribe before 24 April
If you as an Advisor are interested in having your clients invest in the same investment track record of Kauri Notes referred to above (on a tax efficient basis), or alternatively in the Kauri Growth Units, you can do so now by clicking here to download an Investment Statement and application form.
After the 24 April 2008, the Kauri Units offer will be open again and available for additional subscriptions up until 28 October 2008.
Summary of the Kauri Growth Units Offer
Kauri Growth Units |
Kauri Growth Units are designed to provide investors with capital appreciation (aim to achieve higher return than 90 Day Bank Bill Yield published by the Reserve Bank of New Zealand plus 5% p.a.) derived from investment in shares which hold leveraged investments in 6 Permal multi-manager funds. |
Kauri Principal Protection |
Investors have capital protection. This is provided by Merrill Lynch & Co., Inc. rated A+ by Standard and Poor’s |
Historical Performance |
Back testing indicates Kauri Growth Units would have achieved an 18.21% annualised return over the 2 years and 7 months period since inception. |
Benchmark |
90 day Bank Bill Yield Published by the Reserve Bank of New Zealand during the calculation period plus 5% p.a. |
Permal Group and Permal funds Investment Track Record |
Permal Group is one of the worlds leading multi-manager funds with a 30 year investment history of optimising investor returns |
Permal Funds Percentage Participations and Standard & Poor’s Ratings |
41% Permal Investment Holdings N.V. : AAA |
Liquidity of Kauri Growth Units |
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Application Date and Maturity Date |
Applications for class C units must be received by 28 April. Early bird interest is paid. Maturity 31 January 2015. |
Fees and Brokerage |
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Summary of the Kauri Income Units Offer
Kauri Income |
Kauri Income Units are debt securities paying a 9.50% p.a. interest on a quarterly basis. The Units are a leveraged investment in the Permal Group FX multi-manger portfolio fund. |
Kauri Principal and Fixed Interest Guarantee |
The principal amount of Kauri Income Units and the first 8 interest payments commencing from 20th April 2008, are guaranteed by Merrill Lynch & Co., Inc rated A+ by Standard and Poors |
Historical Returns and Gain on Principal |
Back tests indicate a range of annualised returns from 11.6% up to 18.2 % p.a. If the Units earn a return of more than 9.50% annually, 100% of this premium will be paid to investors at maturity. |
Liquidity of Kauri Income Units |
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Permal Group and Permal FX fund Investment Track Record |
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Permal FX Fund Standard & Poor’s Rating |
The Permal Fund has a AA Standard & Poor’s rating for its management and historic performance |
Application Date and Maturity Date |
Applications for class C units must be received by 24 April. Early bird interest is paid. Maturity 31 January 2015. |
Fees and Brokerage |
A management fee of 0.042% per month is paid. There are fees charged to recover expenses for early withdrawals over the first 3 years. Brokerage of 1.5% is paid with a 0.2% p.a. trailer fee* paid quarterly. (*Conditions apply) |
To obtain a copy of the Investment Statement:
Phone: |
0800 728 464 (0800 SAVINGS) |
Web: |
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Email: |
DISCLAIMER: Kauri Units are offered by Savings & Loans Superannuation and Investments pursuant to an Investment Statement and Prospectus. Any decision to invest should be based upon the information contained within the Investment Statement and Prospectus, copies of which can be obtained from Savings & Loans Superannuation and Investments Ltd.
In providing this material, Savings & Loans Superannuation and Investments Ltd has not taken into account your individual investment objectives, financial situation or particular needs. Before you make an investment decision you should, with or without Savings & Loans Superannuation and Investment's assistance, consider whether any advice contained in this material is appropriate in light of your particular investment needs, objectives and financial circumstances. The information provided in the material is a guide only; you should not rely on any of the material without first having spoken to your adviser.