Otago Daily Times 17 September 2005
Liontamer steps out with international share fund
Peter Smith
New Zealand investment company Liontamer has created an international share fund, Global Series 1, to vacuum up money coming out of the funds being closed by BT Funds Management.
As mentioned in these columns on August 6, BT Funds Management has closed its retail New Zealand dollar funds; September 15 was the last date for re-buy without tax implications.
It will continue to offer wholesale funds for larger institutions.
As a result of several requests from financial advisers, Liontamer has produced a capital protected fund based on the major indexes of the world.
The fund will be split in proportion of 25% each into Europe, Japan and the US, with 15% in UK and 5% each into Hong Kong and Switzerland.
In reality, the fund does not invest directly in the market but invests in notes issued by Barclays Bank. In return Barclays use derivatives to track the market indexes. This is how the capital protection is achieved, as Barclays is legally liable to repay the notes on maturity.
The new fund offers two choices of either a minimum return of 15% at the end of the five year period or booster units giving 150% of the market returns. In either case, the investors can receive a return greater than the market if it exceeds those levels over the time period.
It is possible to withdraw during the five year period, but there is the charges of forfeiting the capital protection to early withdrawal, because Barclays is expecting the total funds to remain intact as one mass and would probably refund from another source. Also, there is a penalty for early withdrawal of 3% within the first two years of the investment and 2% early withdrawal period thereafter.
The minimum investment is $5,000 with most advisers giving a free entry (which can be up to 3%) due to much of the funds coming from BT where they would have been eligible for a free switch. This is Trust No. 13 from Liontamer in just over two years. (Actually, it is the 15th as two have been split into income or growth portions as separate trusts). All have been of a similar nature, being closed end funds and using market indexes with capital protection. The funds do not have a tax liability to individual investors as it is an Australian registered unit trust with Australian derived interest. It is not available to Australian investors.
It is treated as a "foreign company" for New Zealand tax purposes. A small distribution of 0.05% will be paid each year (in NZ dollars) and is subject to New Zealand withholding tax.
Since launch the first Liontamer trust from July 2003 has gained by 33% and those funds specifically targeting commodity indexes have grown by 57% since April 2004 and 29% since December 2004 respectively. The "safe" cash funds using 90-day bill indexes have been the least spectacular but still are averaging a total return of 17-18% since May 2004.
The Global fund closed on October 28, unless extended. You can invest any time before that and receive early bird interest. See your investment adviser for an investment statement.
Peter Smith is a certified financial planner and is the principal of Peter Smith Financial Services Ltd, Dunedin.
