Investors in specialist manager Premium’s China Fund can obtain a capital guarantee and use gearing to boost their gains thanks to two added features.
Merrill Lynch has provided two overlays for the fund called Quintessence.
The capital protection component, called the 75 per cent Open Ended Continuously Protected (OPEC) feature, offers a capital guarantee for 75 per cent of the amount invested in the Premium China Fund.
However, unlike other similar facilities, investors do not have to wait until maturity for the capital protection component to kick in.
“This protection increases on a daily basis as the amount of income on the fund increases,” Merrill Lynch vice president equity structured solutions Peter Mermelas said.
“So if you start with a unit worth a dollar in the China Fund that would be protected at 75 cents. If that unit rises to say two dollars the protection would also incrementally increase from 75 cents up to $1.50.”
The gearing facility is called 2 x Dynamic Leverage and allows investors to double the number of units they buy in the fund.
However, under this option the geared amount is treated as a non-recourse loan meaning the investor cannot lose more than their original investment in the fund should the units fall in value.
Investors who want to employ gearing for the 75 OPEC product can do so through the use of a margin loan facility specifically developed to be used concurrently with the capital guarantee offering.
Leverage Equities provides this service with clients being able to choose between a 50 or 70 per cent level of gearing for their investment.
The Premium China Fund invests in companies listed on the Hong Kong, mainland China, and Taiwan stock exchanges as well as companies listed on other exchanges with business interests in the greater China region.
