Liontamer goes shopping for quality

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Liontamer has just launched its new GLOBAL Series 2 fund which puts 10 of the best-known global brands in a single investment basket. The manager explains why this is no off-the-shelf solution.

Wednesday, July 12th 2006, 7:03AM

‘Gillette’, it’s a name synonymous with shaving equipment. ‘Pantene’ and ‘Head & Shoulders’ stand out in everyone’s mind as shampoo brands. ‘Iams’ and ‘Eukanuba’ are the posh and pricey pet foods you get from your vet.

All are very distinctive brands in their own right and they’re all owned by Proctor & Gamble, the number one producer of household products in the world. It also owns ‘Pringles’ (the chips in the canisters), Wella (the TV jingle “you can tell a Wella woman” might pop to mind), Duracell, Oral-B, Pampers, Tide, Ariel, Vicks and Olay.

Proctor & Gamble have 17 ‘billion-dollar’ brands in its stable.

It is just one example of a company from the ‘Global Brands Index’ put together by Liontamer for the latest capital protected fund launch. GLOBAL Series 2 offers a choice of 100% capital protection or 90% (less any entry fee) as well as currency protection. With ‘booster’ and ‘super-booster’ units, investors’ returns will accelerate those of the index.

While this is a concentrated portfolio of 10 shares, you could almost say that each is operating like a small country.

Take the Proctor & Gamble example again. With a market capitalisation of NZ$292 billion, it’s more than four times the size of the entire NZ Stock Exchange. Even L’Oreal, the smallest company in the index at NZ$93 billion, is one third bigger than all of NZ’s locally listed shares.

Source of market cap figures: ASX (May 2006), NZX, Bloomberg and

exchange rates from ANZ (June 2006).

From pantry to portfolio

When your clients look at a portfolio of shares, do they usually have an inherent understanding of each company’s products? Can they easily see the broad macro picture the fund manager is trying to exploit?

In many cases the answer would be ‘no’.

GLOBAL Series 2 is a thematic brand based portfolio full of names we can all relate to – such as 7-UP and Starbucks from the PepsiCo family or Mercedes-Benz and Jeep from DaimlerChrysler.

But brand alone doesn’t make a stock ‘a good pick’. To make the transition from ‘pantry to portfolio’, the research methodology needs to take in both the macro picture and the micro stock-specific analysis.

At a macro level, the markets have taken some hard knocks during May and June. Shopping for shares is now a lot cheaper, which could give this fund a timing boost. The bourses have been spooked by rising interest rates and inflation fears. The risks are evident, but let’s not forget they always have been.

While reporting on the recent market sell-off, the Australian Financial Review said: “Once led precariously by US consumers and Chinese producers alone, global growth has recently broadened to encompass recoveries in the Japanese and European economies. Other emerging market economies from India to Eastern Europe and Asia to Latin America are also powering ahead. Due to contained wages and solid productivity growth, strong global growth has delivered rising corporate profits and left equity markets looking cheap.” (AFR, 17 June 2006)

The global brands theme is deeply routed in the source of future global growth. Wealth and consumer demand are growing across these huge emerging regions. Companies with well-known brands have the power to team up with locals in joint ventures, acquire brands and design for local tastes. Their brands have an aspirational quality and inspire both trust and status.

We believe they’re well placed to benefit from this structural shift in global growth.

At a micro level, companies have been identified with positive share price outlooks as well as strong brand propositions. Two research houses have been tapped into.

The first is a large European fund manager, ‘KBC Asset Management’.

Second, we’ve used company outlooks from global investment bank ‘UBS’.

That combination has been overlaid with industry and geographical spreads to form the final basket.

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