Liontamer throws hat in the ring.
Rob Stock – Sunday Star Times, July 20 2008

As funds go, Kiwi investors have never seen anything quite like it.
Liontamer, a home-grown fund manager specialising in clever structured products, has launched a “knockout” fund which aims to produce 12% interest in its first year. If it does, Liontamer will immediately declare a “knockout”, close the fund and hand investors their money. If it fails to produce that, it will remain open another year, aiming to produce 24% interest, and once again will close if it does.

The fund can remain open for a maximum of five years trying to generate interest, with the target interest rising each year, from 12% to 24% to 36%, then 48% and finally 60%.
In other words, says Janine Starks of Liontamer, investors are compensated for each year their cash is tied up.

If the fund fails to achieve a knockout after five years, investors get all their capital back, provided the index has not fallen by 50% or more. If it drops further, investors lose 1% of their capital for each 1% the index has fallen below its starting level.

In typical Liontamer fashion, the success of the fund is based on the performance of an index, in this case the Euro Stoxx 50 Index of Europe’s leading 50 listed companies.

If the level of the index is the same or higher at the end of the first year than it was at the beginning, the 12% interest is paid, and the knockout declared. The same test of comparing the level of the index at the start of each year with its finishing level happens until a knockout is achieved.

That unusual payout profile is achieved through the purchase of “financial instruments” from Liontamer’s parent company, Belgian bank KBC, which has a credit rating of AA- (the same as Kiwibank).
Starks says the knockout fund concept has proved popular with European investors.