ABN AMRO has launched what is believed to be the first guaranteed gold fund in Hong Kong. The fund will be denominated in New Zealand dollars and has a minimum capital guarantee of 110% after maturity. The fund, which has a relatively short maturity, is targeted at investors holding New Zealand dollars and others looking at the upside potential of both gold and of the New Zealand dollar.
"Market conditions for gold are significantly more encouraging than they have been for years," says Solange Rouschop, the bank's head of structured asset management. "We believe the market will remain favourable and generate still more interest in gold."
ABN AMRO is positive both on the gold price and the New Zealand economy. Carol Wong, head of investment fund services, says growing terror fears and rising political tensions are dampening sentiment for stocks and driving many people to gold, long seen as the surest bet in troubled times. "On top of these tensions, you've got a weakening US dollar, so you've really got a tide of uncertainty that makes protecting assets crucial," she comments
The New Zealand economy remains stable and consumer confidence at a high level she adds. This amounts to a positive view on the New Zealand dollar.
To ensure the guaranteed return, ABN AMRO invests part of the fund in discounted NZD zero-coupon debt securities. These debt securities ensure the guaranteed return. Investors either get this at maturity, or a percentage of gold's upside gain if this is greater than the 10% guaranteed return.
The actual percentage depends on the participation rate determined on December 20, 2002, the fund's official start date. The participation rate could range from 45% to 90% and is anticipated to be around 77% (as at 23/10/02).
The minimum investment in the fund is NZ$5000.
Depending on the success of this fund ABN AMRO says it is looking to introduce more gold funds, both in Hong Kong and in other Asian markets.