Liontamer duo pioneer capital protected
fund
When it comes to unbridled ambition and money-making opportunities, New Zealand is simply no match for the financial powerhouses of London, New York or Tokyo hence "The Bounce". The term is used to describe the trajectory of those clever money-minded New Zealanders who do their stint abroad, get established, then return home with hopes of balancing career with regular weekend getaways at the bach. "They end up getting bounced right back," explains Janine Starks, who has managed to defy the gravitational laws of global finance. Starks, 38, and business partner Laetitia Peterson, 41, are the brains behind a boutique fund management firm called Liontamer based on paper in Australia, but run out of New Zealand. Both waltzed their way from testosterone-driven trade floors abroad to upper echelon investment positions in London and Brussels, but have settled in the financial backwaters of New Zealand without giving up their hard-fought gains. Far removed from their frenzied former financial haunts, they remain connected to the extent they can wheel and deal, but enjoy the ease of New Zealand living. "Despite the market not being as racy as overseas, we have this entrepreneurial potential where two women could come in and say `Let's change everything. Let's start a capital-protected funds management firm, something no-one has ever done," Starks says. And that is just what they did in 2003, moving from "a start-up where literally the mail-outs were done on the floor with children stuffing envelopes getting all the letters mixed-up and getting them out to client advisers through to being able to afford our own mailing house. Really for those things to be done, it has been amazing," says Stark, adding they have done it all without incurring a lick of debt. Peterson, a Belgian-born mother of two girls aged nine and 11, is married to a lawyer from Auckland which is where they make their home. Starks lives in Christchurch with her husband and works from home as do most of Liontamer's 15 employees, who are scattered throughout New Zealand and Australia. Despite the distance, the group stays tightly connected through the miracle of technology, juggling mobile phones, landlines, Blackberries, Skype chats, and wireless laptops all hours of the day and night. They are in the company of but one other woman of comparable status in the financial sector. That's Carmel Fisher, New Zealand's best recognised female fund manager. Lyn McMorran, president of the Institute of Financial Advisers, says Starks and Peterson have quickly put themselves on the map. "They're two very smart women and they've certainly put some innovative products on the market which is a good thing to avoid duplication. The IFA doesn't endorse anybody's products in particular but it's always good to have people doing different things and trying to create value for investors in different ways and they've got a lot of overseas experience they've brought to New Zealand." Last week, Liontamer launched a product new to Australasia called the Knockout. It is the latest of more than 30 capital protected funds put out by Liontamer. The fund is well timed in that it offers cautious but willing investors a chance to make a respectable return that betters the best fixed-term deposit rate with relative low risk. It works like this investors who put up a minimum of $5000 have a shot at making a 12 per cent rate of return after one year if the fund (comprised of Europe's top 50 blue-chip companies) stays static or goes up by at least 1%. If it does, investors are "knocked-out" of the five-year fund and sent on their way with a 12% kiss-off (they call it a coupon) plus their original investment. If the fund drops in value, the money is rolled over into the second year. The same conditions apply, but if the fund remains at zero or goes up, investors stand to double the rate of return to 24%. The pattern keeps repeating itself the coupon amount doubling each time until year five. Investors who make it that far have the prospect of making a 60% rate of return on their investment or getting a full return of their money. Nothing gained, but nothing lost either, in a capital-protected fund. The only hitch is if the fund sinks to half its original value. If that happens, the capital-protection safety net collapses. Investors' losses track the fund's performance. So what is the probability of the market crashing to such a calamitous degree? "It's a dangerous question," says Starks. Based on Eurostoxx's historic performance, investors stand an 80% chance of walking away with a 12% or 24% cheque in one of the first two years the series run. Still, disasters are always possible as the tech-bubble blow-out of the late '90s confirmed. That is the only occasion (in Eurostoxx's recorded history going back to 1992) when the market fell to half its value. Dubbed the "jumper fund", the Knockout series is modelled after a similar offering by Liontamer's principal shareholder KBC Group, which rolled out the product 18 months ago. Starks says it remains largely a foreign concept in Australasia. Liontamer's rollout in New Zealand will mark its debut. Although new, Starks says it is nothing radical. "Basically, it's taking equity and giving it a set routine. That's the really interesting part of it. Ordinarily people in the share market don't know what they are going to get, they think `Gosh, I'm scared of investing because a) they might go down or b) because they have no idea what the returns will be like; even if they are positive they could still be awful. "What we're giving people is a lot more certainty about what will happen. They're very protected if the market falls less than 50%. But you've got to go into this believing the markets are not going to lose half the value. "For the parent company KBC Group's the Knockout was the Brussels-based bank's (the 10th-largest in the world) best seller in its first quarter in 2008, attracting $NZ150 millon in investment dollars. Starks says she is unsure what kind of reception it will get. "A lot of people look at it and see it something like magic, or financial wizardly and think, `How can somebody do this?"' Starks says the type of financial instruments used to create capital-protected funds (not just the Knockout) have been around for some time as instruments to protect against sharemarket falls. "There is nothing mystical about them and used the right way, they form a vital risk-management tool in many areas." Knockout closes off to investors on September 12. Another feature that is likely to make the Knockout attractive investors with less than $50,000 in the fund are spared having to pay tax on their gains. That gives the fund a considerable advantage over a fixed-term deposit. Assuming a 39% tax bracket, one would have to make an 18% rate of return on a fixed-term deposit to put it on par with the Knockout's 12% coupon. The pair have a shrewd ability to sniff out profit and opportunity. Before starting up Liontamer, Peterson was director of capital markets for the Bank of New Zealand. Within days of leaving the BNZ, Peterson had a chance encounter with Starks and quickly brought her on board. Starks, former head of research and product development at Britain's award winning investment advisory firm Chase de Vere, was doing work for a website that specialised in Peterson's area of interest at the time. Starks says Peterson was her sole business contact in New Zealand after the website flagged Peterson as their only user from New Zealand. They will not disclose how much money they have under investment but say it is in the multi-millions. And they have attracted the attention and financial backing of KBC Group (which has a market capitalisation bigger than New Zealand's top 50 companies combined). "If I put an ad in the papers tomorrow in the UK, I'd been flooded
with former Kiwis looking for a way back home," says Starks.
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