Lion's share protected

By ROB STOCK - Sunday Star Times | Monday, 25 August 2008

Home grown fund-manager manager Liontamer will invite investors to power up their returns with a capital-protected alternative energy fund.

Liontamer specialises in creating capital-protected funds, and its latest offer, which it will unveil this week, will be a fund giving investors exposure to the share price performance of 15 companies profiting from renewable energy sources such as wind, solar and geothermal energy.

Because investments in alternative energy companies have traditionally experienced the same bumpy ride as airline passengers coming in to land in windy Wellington, the sector is especially well-suited to a capital- protected fund, said Liontamer's Janine Starks.

There was mounting recognition around the world that reliance on fossil fuels had to change, she said. Just 3.4% of the world's power came from alternative energy sources, with the bulk, some 67%, still derived from fossil fuels such as coal and oil. Hydro projects represented 15% of power generation, and nuclear 14%, according to the International Energy Agency.

Starks said the recent global study on the use of alternative energies in developing and industrialised countries showed record investment levels in new renewable energy production, especially in Germany, China, the United States, Spain, Japan and India. Last year more than $US100 billion ($140b) was spent on new alternative energy production.

The Liontamer fund will get investors exposure to a portfolio of 15 shares selected by its 51% shareholder, Belgian bank KBC, which also provides the capital-protection on the fund.

The portfolio includes firms like German solar-cell maker Q-Cells, British engineering firm Johnson Matthey, and Nordic hydro energy generator Fortum Corp.

All were larger, developed companies, with market capitalisations of between $2.7b and $59.4b, as the fund was not about betting on firms offering untested blue-sky technology.

Investors can choose one of two unit classes. Base units have 100% capital protection, but offer investors exposure to 90% of the gains of the portfolio, which can be seen as the cost of the capital protection. Booster units have 90% capital protection, but investors get 110% of the gains made by the portfolio.

There's a 3% entry fee, but no annual management fee. Funds are locked in for 5 1/2 years, though the fund will cash up early if, within the first three years, units hit $1.80 from their starting point of $1.

There's a 2% early exit fee. Capital protection is lost for those cashing out early. Next month Liontamer will launch an alternative energy fund with no capital protection, and from which investors can withdraw their money at any time.