PBA Capital has launched a capital guaranteed fund that aims to achieve an annual return of 15%-20% ...
PBA Capital has launched a capital guaranteed fund that aims to achieve an annual return of 15%-20% with less than 10% volatility through using a wide variety of alternative investment techniques.
The Evolution Portfolio, a multi-advisor portfolio developed in conjunction with Société Générale, is denominated in both dollars and euros.
It includes a 100% capital guarantee and a profit lock-in feature.
The product harnesses the skills of a large team of alternative investment specialists that cover all the major strategies. They include commodity trading advisers, global macro managers, long-short equity traders, convertible bond arbitrage managers and event-driven managers, including merger arbitrage and distressed securities.
The fund aims to achieve low volatility through blending non-correlated managers. This is enhanced by the use of a 'dynamic leverage' technique implemented by Société Générale. The minimum investment is $25,000 or e25,000 for qualified investors (that is, portfolio bond providers, nominee accounts, private banks, trusts and stockbrokers). The offer period lasts two months, from 15 February to 15 April. The 15%-20% targeted returns are net of all fees the costs of sustaining the capital guarantee.
The capital guarantee is structured in the form of a guaranteed note issued by Société Générale. The note has a six-year duration and forms part of Société Générale's $20bn Medium Term Note programme. It has two classes, both guaranteeing that at the maturity of the notes in 2006, at least 100% of the nominal capital guarantee will be returned.
According to PBA's research, a dollar guaranteed note would have returned 23% pa over the past six years, while the euro guaranteed note would have achieved 20%, both net of fees.
The target profit lock-in is set at 6% for the dollar class and 4.5% for the euro class. In addition, the fund can lock-in up to 50% of all profits made in a highly profitable year, subject to a performance hurdle rate and cap. Once these profits are 'banked' they are added to the guaranteed maturity value of the investment and cannot be lost later on.
After an initial 12-month period, investors can redeem without penalty. However, PBA has targeted the fund at investors seeking six-year holdings and recommends that investors stay in the fund for at least that length of time.
All PBA portfolios employ the 'four seasons' philosophy - they are designed to perform in any investment environment and as such always include some measure of investor protection, either through guaranteed capital protection scheme, as in the Evolution Portfolio, or through high levels of diversification.
Four seasons funds are all multi-manager, multi-strategy and span four asset classes. The first, 'managed liquidity', includes cash balances and aggressively managed currency portfolio. The second, 'alternative investments', includes hedge and managed future funds.
Then there is the 'capital protected' class, which is often represented by 90-day reset funds that contain options floors and caps so as to react to market volatility. The fourth class includes all the traditional asset types.
Before PBA will use fund managers, they must fulfil certain criteria. For example, they must have at least $100m in assets to manage and a minimum track record of 36 months.
Furthermore, Société Générale organises on-site due diligence visits to establish risk in the investment system being used, and every manager's clearing broker must be approved by the company.
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