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Keeping temperature down on intl share investments

The new Celsius fund being promoted in New Zealand by Macquarie is another option for investors to get international share exposure, but lower risks than normal.

Thursday, December 13th 2007, 6:55AM
The fund falls into the alternative investment asset class and is being promoted as an income producing investment – as it targets a post-tax target distribution of 9% annually - however its underlying assets are equities.

It is managed by Barclays Capital which uses a buy-write investment strategy. The strategy for stock selection is mechanical or more quantitative based rather than being done by people.

Buy-write strategies have been around for many years and use a covered-call strategy to lower risks.

The fund will provide income by receiving dividends from and selling options over a basket of 20 shares chosen from the Dow Jones STOXX Global Select Dividend 100 Index. In addition, the strategy will buy put options at 90% of the market price of each stock, allowing a maximum loss of 10% per stock for that three-month period.

In some ways this is an alternative to other funds in the market, or recently marketed, which have capital protection. Celsius doesn't have the capital protection, however it protects downside risks by the use of put options.

Macquarie is aiming to raise $20 million in New Zealand and plans to have dual liquidity options. Celsius will be listed on the stock exchange, but it will also offer a weekly buy-back facility.

Celsius has been structured to be a PIE compliant fund for tax purposes.

Standard & Poor's Fund Services has given the fund a 'strong' rating.

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