Sunday Star Times

26 Sept 2004

Product column

Product: Liontamer MONEYfund Series 2 Offeror:

Liontamer Dates offered: Closes October 29

How it works:
Like all Liontamer's products, there's a guarantee that 100% of capital will be returned at the end of the five-year term (there's no guarantee on early withdrawals).  Your money is invested in Deutsche Bank's Dynamic Carry Index.  The index is based on the theory that investors chase high yields from a range of 10 mostly major currencies (the US dollar, sterling, euro, yen Canadian, Kiwi and Aussie dollars, Norwegian and Swedish krona and Swiss francs), Deutsche Bank invests in the three markets with the highest interest rates and borrows from the three with the lowest.  Growth comes from the difference in interest rates and shifts in currency rates.  There are two types of units.  Income units aim to produce a 7% income.  Here, the minimum, if things don't go well, would be 0.05% and with modest capital growth, income would be around 5%.  Accumulation units aim to roll up income seeking a capital return of 17% a year.  Early redemption will happen if these targets are hit early.  Minimum investment is $5000.  Entry fee is 3% and Deutsche Bank takes 1% a year.

What we don't like:
The more investors seek capital protection, the more complex products will become.  This one is a humdinger for that, though it's more transparent than say the struggling OMIP series and for that matter some finance company stocks.

What we like:
The index has a track record which indicates the fund will have a risk return profile similar to an international bond investment.

Conclusion:
The rule is, unless you read the prospectus and can understand it and decide that it works for you, seek expert advice.