What is it called and what sort of savings product is it?
Kauri units are an absolute return fund, which has both growth and income units.
What is the company behind it?
The units are being offered by Auckland-based Savings and Loans, but the underlyingfund is a long-standing and successful American hedge fund called Permal. Also, the capital protection is being provided by Merrill Lynch.
Who is the target market?
The kauri units are being aimed at high net-worth individuals who want a portion of their portfolio in alternative investments, as well as retail investors who would not have access to alternative investments in other ways. They are also being pitched as an attractive alternative to debenture stock.
What return does it offer?
Income units are targeted to return 9.5 per cent annually, paid quarterly. The growth units are targeted to achieve bank bill rate plus 5 per cent each year. However, because they are "absolute funds", the worst you are likely to do is get back just your original investment.
When was it launched?
Early December - and the units will be available for subscriptions from tomorrow.
What other products is it like or is it competing with?
Kauri units are competing with the OM-IP products from Man Investments, and to a lesser degree Liontamer's funds and ABN AMRO's Hindsight fund.
Is it long term, short term or medium term?
These notes have a seven-year term, but liquidity is provided and can be exited early.
What is the unique selling point of this fund?
The track record of the underlying Permal Group is impressive. Other features are this fund is open for a year and is portfolio investment entities (PIE) compliant.
How strong a stomach do you need for it?
With the capital protection, the risk is relatively low.
What's the hitch?
These types of capital-protected funds have a lot of appeal in this volatile market. Perhaps the biggest drawback is the capital protection has a cost, which erodes the potential upside.
