ALPHA Structured Investments
We hit the button on Alpha POWER Shares – 'Asian Lions'

We hit the button on Alpha POWER Shares – 'Asian Lions'

In volatile markets, the name of the game is: capital preservation. But capital preservation does not mean your SMSF and high-net-worth clients have to forgo solid total returns, even with falling global share markets.

Since launch in 2006, Alpha POWER Shares has successfully combined quality, concentrated share portfolios (with a defensive active manager targeting income and capital growth over the medium term) with a simple derivative overlay to enhance yield and reduce risk.

The embedded protection in Alpha POWER Shares has really paid off in the last quarter, with POWER Shares strongly outperforming the share market.

A surprising source of yield is Asia, a region not normally noted for income-producing investments. Most people look to Asia, like other emerging markets, for higher capital growth, albeit with high volatility.

The reality is there are a growing number of Asian economies with blue-chip stocks producing solid dividend yields – and with good growth prospects over the medium term. This makes the Asian markets ideal for inclusion in Alpha POWER Shares, with our new Alpha POWER Shares – 'Asian Lions' portfolio open for investment in April 2008.

We’ve also found that the higher volatility in Asian markets can be used to maximise income through the POWER Shares derivative overlay.

Simply put: the extra income from these options strategies, on top of dividends from the blue chip stocks in the portfolio, makes Alpha POWER Shares – 'Asian Lions' a strong and truly viable investment opportunity for self managed super funds and high-net-worth income investors.

Key features of Alpha POWER Shares – 'Asian Lions' include:

  • Actively managed share portfolio, using Lion Global Investors Limited ("Lion Global Investors") (Lion Global Investors has over US$24 billion (as at 31 March 2008) in funds under management and is rated Asian fund manager of the year for 2007 by Standard & Poor’s);
  • We only select stocks from developed Asian economies, and then allocate based on GDP growth;
  • At inception, the stock portfolio will be drawn from the high-growth economies of South Korea, Taiwan, Hong Kong, Singapore, Malaysia (eligible countries that don’t make the grade right now are Japan, Thailand, Indonesia and the Philippines)
  • We use an almost identical mandate to our existing Alpha POWER Shares Australian portfolios to guide Lion Global Investors' stock picking, including targeting:
    • Low-volatility stocks (less than 30%);
    • Relatively high dividend yield (more than 2%);
    • Average daily liquidity of more than A$10 million;
    • Minimum equivalent market capitalisation of US$400 million;
    • Relatively high correlation within the portfolio.
  • This stock-picking mandate allows us to use precisely the same derivative overlay structure that has worked successfully for our Australian POWER Shares portfolios; for example, the simple, rules-based sale of 3-month call options with exercise prices set at 103.5% of the spot share price, and the purchase of 3-month put options with exercise prices set at 90% of the spot share price;
  • Alpha POWER Shares – 'Asian Lions' is 100% capital guaranteed by UBS Bank AG, which also manages the derivative overlay and (vitally) fully hedges currency risk on the capital value of each share and option position, as well as on each dividend as it is declared;
  • Alpha POWER Shares – 'Asian Lions' is delivered via the Alpha/BlackRock Customised Portfolio Service (accessible via the PDS to be issued in early April 2008), which, in turn, invests in a simple capital guaranteed note issued by UBS Bank AG – to minimise transaction costs and because of the absence of Australian franking credits on offshore dividends, your clients doesn’t need to hold physical shares in this portfolio: this is managed for your client by UBS and BlackRock.

The design of Alpha POWER Shares – 'Asian Lions' is ideally suited to current market conditions:

  • Asia is likely to offer stronger returns than Australia, US or Europe in both the short and medium term;
  • Income investing is a high priority in current volatile markets, with capital growth over the next 12 to 24 months likely to be harder to get;
  • Capital protection to preserve your client’s wealth has proven its value in the current market downturn;
  • We are also pleased to announce that MBL Investment Lending will make available its 100% investment loan, and Interest Prepayment Loan, for Alpha POWER Shares – 'Asian Lions'.

We will be providing you with full details of the Alpha POWER Shares – 'Asian Lions' portfolio early next month, as soon as the PDS goes live. If you would like more information on Alpha POWER Shares – 'Asian Lions' in the meantime, please email alpha@alpha-invest.com.au or call 1300 769 694.