ING Investment Management in Hong Kong has launched the ING Global Brand Names Guaranteed Fund, a fund that will invest in a basket of 10 top brand names. The four-and-a-half year fund comes with a full capital guarantee combined with 4.4% in coupons over the full period. On top of this there is the chance for capital growth of up to 68%, based on an 18.67% or more return on the 10 stocks in each of the nine six-month periods.
In the fund's explanatory memorandum ING states that if the fund raises less than $15 million between July 16 and August 15 then it reserves the right to return all cash to investors and cancel the launch of the fund. ING expects to raise at least $25 million according to the same document.
Chuak Chan, regional business development director for ING Investment Management, says that so far demand for guaranteed funds is holding up, although he declined to comment on the target size of the fund mentioned in the memorandum. He says investors in Hong Kong remain interested in guaranteed funds although he admits that it is increasingly difficult to sell a guaranteed product, as evidenced by the low management fee of this product. The fact that the memorandum states that if less than $15 million is raised then the fund could be cancelled indicates this could be the breakeven point for ING.
The fund will have a 0.89% per annum management fee, amounting to 4% of the amount raised and will be charged up front. There is also a 0.8% fee for other fees and expenses. There are no subscription or redemption fees. The minimum investment is $2,500.
The guaranteed 4.4% coupon is provided by zero coupon bonds, in which about 93% of the amount raised will be invested and with a small amount in options on the equities of the top brand names. This is the source of any potential upside, which is capped at 18.67% per six-month period when all returns are locked in. Negative returns will be disregarded.
The fund participates in the performance of Microsoft, LVMH, Nike, Heineken, Nokia, Citigroup, L'Oreal, Pepsico, Nestle and HSBC.
The fund will be distributed through ten different banks in Hong Kong and through ING investment consultants.