KBC Asset Management has launched two new capital-guaranteed funds, called "Power Jump" funds, one in US dollars the other in Australian dollars. They are linked to the stock performance of a basket of 20 internationally recognized companies in high-growth sectors ranging from consumer goods to technology, each with market capitalization of at least $20 billion.
For example, some of the big names in the basket include: Coca Cola, Johnson & Johnson and Intel Corp, as well as Samsung Electronics, Canon Inc, and PetroChina. The performance of the basket of shares of the two funds will be calculated based on a "power jump mechanism".
Here's how it works. At maturity, the worst five performing stocks among the 20 will be dropped - that will be the "first jump". Then, for the "second jump", negative performances of the remaining 15 stocks will not be counted.
The "third jump" looks at the positive performances, which will be rounded up by a "10% jump." For example, an increase of 0.01% will be rounded up to 10%, an increase of 10.01% will become 20%, etc.
After the three jumps, the potential return will be calculated this way: Basket average performance equals the sum of the "round of performances" of the best 15 performing shares divided by 15. The potential coupon at maturity will be the basket average performance times the participation rate minus the guaranteed coupons.
"The two funds offer greater chances for investors to capture higher potential returns," says Rex Lo, director of structured products for KBC financial products Hong Kong and a representative of KBC Asset Management. "Even if the market goes down, investors could receive the guaranteed coupons and 100% capital guaranteed without any potential coupon. As for the selection of shares in the basket, we aim for diversification; therefore, shares of five different high-growth sectors and different regions are included."
For the US dollar fund, the minimum investment is $3,000. The investment period is four years with an 8.5% guaranteed coupon. Investors will a receive 2% guaranteed coup at each of the ends of the first three years, and 2.5% in the fourth year.
For the Australian dollar fund, the minimum investment is A$3,000. The investment period is 2.75 years with an 8% guaranteed coupon; investors get 2.5 percent at the end of year one and two respectively, and then receive 3% at the end of 2.75 years.
There is no subscription or redemption charge, but there is an upfront management fee of 0.9% per annum, plus an annual management fee of 0.1% for both funds. They will be offered until 30 September.
They will be distributed by ABN AMRO Bank, Asia Commercial Bank, Bank of China (Hong Kong), Nanyang Commercial Bank, Chiyu Banking Corp, Dah Sing Bank, Fubon Bank, Hang Seng Bank, HSBC, Liu Chong Hing Bank, Mevas Bank, Bank SinoPac and Wing Hang Bank. Deutsche Bank is the guarantor of this fund.