How to use and promote Liontamer?

By Liontamer Investor Relations
30 May 2003

As protected products are relatively new in New Zealand, several financial planners have asked us where the Liontamer MSCI World Index Trusts fit in their clients' portfolios.

Protected products are "hybrids" and hence difficult to categorise in terms of portfolio construction. However, based on the UK experience, here are a few ideas on how they could be built into existing or new portfolios depending on the type of investor.

Aggressive investors

• Protected products are a very useful tool for aggressive investors to further diversify and lower their risk by replacing some of their core international equity holdings with this type of product.
• Aggressive investors have typically the largest proportions in equities, often international, and will have suffered greater losses than others. Protected products can be used to underpin that loss and prevent it from getting worse, making a recovery far more likely.
• Hence, the diversification benefits from adding protected products to their investment portfolios as a new asset class, are very tangible for these investors.

• With a return equal to 100% of the growth in the MSCI World Index, this product could sit comfortably alongside more traditional international equity funds.
• The key difference between this product and traditional international equity funds is the inherent capital protection at maturity (i.e. insurance against capital loss in a bear market).
• This product offers pure growth as it tracks the MSCI World Index without dividends reinvested. Effectively, by giving up the income from dividends, investors are able to pay for the insurance premium.
• The combination of 100% of the upside, 100% capital protection, no management fees, currency hedge, tax effective structure, make this product particularly attractive compared to more traditional international equity funds.
• Hence, we believe this product offers a perfect compliment or replacement of traditional international equity funds in a balanced portfolio.

Conservative investors

• This product is an excellent way to give conservative investors, who value protection of capital highly, an exposure to growth assets. This may be necessary in order to continue to grow their capital base or as an inflation hedge.
• This product offers 100% of the upside of global equity markets over the next seven years but, more importantly for these investors, full protection of their capital if they stay invested for the full seven year term.
• In addition, they will receive a small fixed return of 1% pa.

Fearful investors

• We have heard many stories of clients who now have an almost irrational fear of the equity markets. This product offers an excellent tool to get these investors back into the markets.
• Most investors fundamentally understand that equities are the best performing asset class over the long term. However, they are reluctant to invest following multiple years of double digit losses. This product allows them to get back into the market and effectively buy at the bottom of the market.
• They cannot lose any more of their capital and they are exposed to ALL of the upside over the next seven years. At some stage, markets are likely to bounce back and unless they are invested, these fearful investors will miss out. If markets don't bounce back and we are in for a prolonged bear market, then these investors will not lose any more of their capital which is their worst fear.
• By leaving their savings in interest bearing deposits, these investors are basically standing still in the current low interest rate environment. Investors who are invested in corporate bonds are exposed to increasing default and interest rate risk.

Several financial planners have also asked us how we can help them promote the Liontamer MSCI World Index Trusts to existing and new clients.

We have prepared a couple of tools depending on whether you are targeting your existing client base or new business.

Existing clients

• Given the long stretch of bad performance of most international equity funds, you may think that the last thing investors want to hear about from you is further bad news about the performance of their international equity investments or a new international equity fund.
• Ironically, these are exactly the type of investors we had in mind when creating Liontamer.
• We suggest you ask your clients directly whether they are interested in this product and you may be pleasantly surprised...
• We have prepared a letter (click here to view) which you can send to your clients. Feel free to add to the letter as you see fit. We are happy to assist you with the mailout. Call us on 0800 210 450 if you would like our help with this.

New business

• We believe this product is an excellent opportunity to start generating new business for you. Which investor would not like the opportunity to get 100% sharemarket growth with 100% capital protection? All they have to do is stay invested for seven years.
• We have prepared two sample advertisements (click here to view) which you could place in your local newspaper or investment magazine with your contact details.
• Let us know if you are interested in making Liontamer work for you! Call us on 0800 210 450 to arrange an advertisement.