ABN Asset Management has launched a new fund for Hong Kong investors, which guarantees a 6% return at the end of the first investment year and a potential upside bonus, on top of a 100% return upon maturity. The US-dollar dominated Elite Assets Guaranteed Fund allows bullish macro-economic investors the opportunity to invest in a basket of four classes that consist of oil, gold, Hong Kong and India exposures.
The fund also targets investors over a short maturity of three years and eleven months.
"This time we went all out to look for potential winners in the market- real probability gainers," says Pieter Oyens, ABN AMRO Asset Management's head of product management for Asia-Pacific. "ABN AMRO's best of theme has always been well received by investors."
According to ABN, the light crude oil component of the basket is a strong inclusion, given: strong demand from countries such as China and India; a decline in production volume in most existing oil fields; restricted access to new fields and the expected continuation of high prices due to underinvestment in capacity and increased lifting costs. Similarly, ABN AMRO Asset Management points to a favourable supply/demand dynamic in global gold prices to justify its inclusion in the Elite Assets Guaranteed Fund. The firm believes the increasing volatility of the US dollar will ultimately bolster the spot price of gold even further.
Outside of commodities, the Dutch asset manager also believes Hong Kong will remain one of the region's most robust economies, pointing to blossoming tourism and retail numbers, improving property values and closer economic integration with China as catalysts for including the Hang Seng Index in the basket.
Perhaps the most interesting inclusion in the guaranteed fund is the addition of an India component, based on the S&P/IFCI India Index. Strong GDP forecasts and an expectation of corporate capital growth are among the chief driving forces behind the country's inclusion.
Its bullishness has also been fuelled by the growth of outsourced-backed export sector and liberalization of the financial system, which ABN says will encourage further investment and growth in the private sector.
In determining returns, the fund will not look at negative performance over the given fixing dates. Performance will be determined by multiplying 50% of the return of the best performing asset class, 30% of the second best performing asset class and 20% of the third best performing asset class. The worst performing component will be disregarded and the three best added together to constitute the final performance of the asset basket.
At maturity, the bonus per share will be calculated by multiplying the performance of the asset basket, as derived from the above process, by the participation rate (indicative rate is currently 32%). From this number, the guaranteed rate of 6% is then subtracted and multiplied by the issue price ($100).
Regardless of the basket's performance, the minimum amount investors will receive over the investment period is 106%. The Elite Asset Guaranteed Fund will be offered between June 6 and July 15.
It requires a minimum investment of $5,000 and matures on 19 June 2009. Management fees are payable upfront and come in at up to 1.18% per annum.