• BRIC Funds - Is it too late?
• Protected Currency Fund - non-correlated assets make sense
• FMG MENA Fund - the last investable frontier?
• Gold - hitting new highs, consensus is higher still
• Macquarie Commodity Linked Guaranteed Notes - extended deadline
• MitonOptimal - award-winning at Lipper awards

 BRICS All the Rage – but is that wise?

The latest fad in mutual fund circles is yet another indicator pointing to the upcoming crash of Indian stocks. Mutual fund companies, infamous for introducing hyped-up products tied to mania-plagued markets, are launching so-called BRIC funds in 2006. BRICs, or "funds investing in Brazil, Russia, India and China," are now all the rage as billions flood mutual fund coffers following meteoric gains in Brazil, Russia and India since 2003. China, the worlds’ fastest-growing economy over the last 20 years, is the only dog in the BRIC fame, down 20% over the last five years.

BRIC funds are no different than the Greater China funds launched over 10 years ago, following the great emerging markets bubble in 1991-1993. From 1993 to 1995, dozens of China-dedicated funds were launched; by 1997, the Shanghai and Shenzhen bourses had collapsed, down more than 75%. The same phenomenon occurred in the post-1995 period as technology stocks went ballistic; yet by 2002, the NASDAQ was well on its way to losing over 75% of its value from the March 2000 bull market peak.

The hottest country at the moment is India all the rage at the annual Davos Economic Forum in Switzerland last January. No doubt, India merits high praise for drawing massive foreign direct investment over the last decade after liberalizing its economy. Over the last three years India’s economy has averaged an 8% GDP growth rate. But the stock market is now clearly in full-blown, Dutch tulip-bulb land, up a staggering 300% since 2002. Twice in the past six months, Indian finance officials have warned that stocks are overheated. Warnings like this are reminiscent of Alan Greenspan’s irrational exuberance foretoken in 1997 just three years before the bull market ended.

India’s stock market will crash before 2007, simply because its’ the Eighth Wonder of the emerging world today. From investment articles, newsletters, conferences and the popular newsstand press, everyone is touting India. And when everyone is buying the same market or trend, its’ always a matter of time before that rally ends very badly. Market history is littered with shattering crashes and the enormous loss of wealth as investors overstayed their welcome or purchased a secular trend after it peaked. India will be no different.

As for the other BRICs, Russia’s stock market bubble makes India’s look pale in comparison. Driven to the Moon by soaring oil and gas prices this decade, the Moscow TRS Index has skyrocketed over 2,500% since bottoming in late1998. And Brazil’s BOVESPA Index has surged more than fourfold since 2002.Yet despite harboring the worlds most envious growth rate for more than two decades, mainland Chinese stocks remain extremely undervalued in 2006.

Russia and Brazil, two incredibly over-inflated markets, might continue to rally further this year simply on the thrust propelled by the commodity bull market. Both countries derive a major share of their export revenues from raw materials. But India doesn’t.

The overheated BRIC nations are too hot to handle now all except China.

We have two excellent products for you to counteract this.

• FMG Rising 3 is a hedge fund of funds on India, China and Russia; the hedge should limit downside but maximize the upside.
• Commerzbank structured note on HSBC BRIC Freestyle Fund offers a 95% capital guarantee over two and a half years to August 2008. On maturity of the note you receive 95% of your capital plus 80% of the quarterly average of the fund.

Protected Currency Fund

This is a reminder that the Appleton Protected Currency Fund - Series 3 will be open through April 15th, 2006.

The fund provides access to the returns available in the global currency markets, backed with AA-rated capital protection. The first series of the fund recorded an annualised return since inception of 8.77% through December 31st, 2005. Further, the returns are generated with near-zero correlation to the global equity and bond indices.

The fund has a term of 7 years and is available for a minimum investment of €10,000.

Following on from the highly successful launch of Series 2 in December 2005, the offer period for Series 3 is currently open through April 15th, 2006. As with Series 2, the salient features of the offering are as follows:

• AA-rated capital protection
• Low correlation to equity, bond and alternative investment indices
• Strong actual historical performance
• Highly competitive commercial terms
• Monthly liquidity
• Manageable investment minimums
• No management fee at the fund level 

Contact me for further details

FMG Launches Middle East and North Africa Fund of Funds (MENA)

Described as "One of the Last Investable Frontiers". 

FMG now offers you one of the world’s first multi-managers Middle East North Africa (MENA) Funds. We expect the MENA markets to outperform most of the world’s emerging markets.

A region virtually untouched by Western investors, flushed with liquidity, controls the majority of the world’s future energy needs, yet only accounts for 2% of the world’s market cap. Nevertheless, the region represents 20% of the world’s emerging market capitalization.

Most of these markets have had a huge up move to June 2005, then a major correction as of April 2006. FMG believes the Bull Market is still intact, and now it is an attractive time to enter these markets.

With expected high future energy prices, we expect the MENA markets to outperform most of the world’s emerging and developed markets.

The Fund will be a Fund of Funds initially using six Middle Eastern Managers.

The fund will take the usual format as with other FMG Funds, trading monthly with a minimum investment of US $ 10,000 or equivalent in Euro for the Retail investor.

For a detailed presentation, please email me now

The Outlook for Gold Investment

“The probability has grown that we are currently in the middle of a once in a generation rally that will take the metal to a new all-time high”

Since approximately September last year a sustained wave of investment demand has carried gold to fresh highs. The new money coming into the market from investors has more than offset the impact of a price-driven slide in jewellery fabrication and surge in scrap supply. This is likely to be the pattern for much of the rest of this year and, probably, also in 2007. Investors have both the capacity and the motive to drive prices to well beyond what would be justified by the normal interplay of gold’s supply and demand fundamentals. The probability has grown that we are currently in the middle of a once in a generation rally that will take the metal to a new all-time high.

Investment in gold is being driven by a variety of motives, which can all be summarised under the traditional headings of either “greed” or “fear”. Most importantly, the majority of these motives look set to become more, rather than less, compelling over the next couple of years. A good example is the growing crisis over Iran’s alleged nuclear weapon ambitions. Another is the outlook for the US economy and the dollar: the worsening external position of the United States is convincing more investors that a major slide in the value of the dollar is inevitable. Indeed, looking ahead the only major cloud on the horizon for gold is the ongoing rise in nominal short-term interest rates. However, the rising cost of carry is much less of an issue when investors are confident of double digit gains in gold over the short term. Similarly, the growing contango on gold is only a threat if shorts – be they speculators or mining companies – take advantage of it. And, finally, there is a large question mark as to how far the Fed is prepared to go in terms of increasing US short-term interest rates. Another 50 basis points will by no means be sufficient to derail this gold market rally and, conversely, what if a weakening US economy results in interest rate cuts within the next 12 months?

When it comes to the potential capacity for investment demand, the reality is that the surface has still barely been scratched. To take just one example, according to Watson Wyatt, pension fund assets in the 11 major markets* came to $16.4 trillion at the end of 2005. Only a tiny fraction of such institutional money has been allocated to commodities in general or gold in particular. Likewise, there are around nine million high net worth individuals (with liquid assets exceeding US$1 million) and within this total over 600 US dollar billionaires, who collectively have even greater sums to invest. Although from an extremely low level the number of institutional and high net worth investors in gold has risen over recent years, the absolute percentage active in gold remains tiny. And then there is the general public. Retail investors have to-date not participated to any great extent in this rally. A good indication of this is the generally lacklustre demand in Europe and North America for bars and coins. But there is increasing media coverage of gold’s performance, with anecdotal evidence that this is beginning to encourage ordinary investors to look at gold. Of course, once the retail bandwagon really starts to roll this would signal that the rally is entering its final phase, although that point is still some way off.

Philip Klapwijk, Executive Chairman of GFMS

March 2006

• Aliquot Gold Bullion – a pure Gold Bullion Fund. No equities, no futures, no leverage.
• Aliquot Precious Metals – a pure Precious Metals Fund. No equities, no futures, no leverage

Macquarie Commodity Linked 100% Guaranteed Notes application deadline extended to April 21^st, 2006

Wall Street Legend Jim Rogers Speaks Out

By Jon A. Nones
16 Jan 2006 at 05:22 PM EST

"If you're good at buying stocks, do so, otherwise you're better off investing in commodities," said Rogers.

In a presentation that went around the world, Rogers examined the U.S. currency, stocks, bonds and, of course, Asia to explain his viewpoint. Overall, he said commodities are in a bull market.

Picking up where Frank Holmes of U.S. Global Investors, Inc. left off in the morning, Rogers wasted no time in hitting upon China and its soaring economy, telling listeners to "teach your kids Chinese." He painted a picture of insatiable demand for commodities in the country, fueled by an enormous population, thriving economy and a will to succeed. "China is the next great country of the world, like it or not," he began. 

According to Rogers, China has the best capitalist market in the world right now.  Asians are willing to work as hard as they have to in order to become as prosperous as those in the West. They don't ask how many sick days they will get, or what holidays they will have off; instead they ask when they can work, Rogers said. And they work for far less than we do.  "Most Chinese don't have electricity, they're going to get electricity," said Rogers, adding that the power will obviously have to come from energy sources like oil & gas.

"Most people in the world don't know that you can buy and sell commodities," Rogers explained.  He said when people do catch on; this could launch the bull market for many years.  Rogers added that in his experience, the shortest bull market in commodities lasted 15 years, while the longest lasted 23 years.

"It takes a long time for bull markets to come on stream and a long time for people to take advantage," he said.  According to Rogers, all the great oil discoveries were made over 30 years ago. Reservoirs in Alaska, Mexico and the North Sea are in decline, he said. Not to mention, nobody really knows how much oil Saudi Arabia really has.  "Since 1988, Saudi Arabia has said it has 260 billion barrels of oil - that's 18 years of the same number!" Rogers said.  He added that the U.K. has been an importer of oil for years, and China has recently gone from an exporter to an importer. Although Russia has huge amounts of reserves, it hasn't put forth the work to get wells online, Rogers said.

"When supply goes down and demand goes up, that's a bull market," he frankly put. "Unless someone discovers a substantial amount of oil soon, the price is going to keep going up."

Aside from oil & gas, Rogers did add that agricultural commodities could prove very valuable as well. He said sugar, wheat and soy haven't moved nearly as fast as the metals and are far from all-time highs.

"By 2018, everyone is going to be investing in commodities and everybody is going to be screaming that commodities are going to go up forever," Rogers concluded.

The Macquarie Commodity Linked Notes invest in a weighted basket of Goldman Sachs Commodity Index (GSCI) Sub Indices to give a broad allocation to price movements of global commodities:

With the Macquarie Bank Commodity Linked Notes investors not only benefit from a 100% (asset backed) capital guarantee at maturity, but will also enjoy an enhanced return of 150%* in the quarterly averaged upside of a broad range of commodities with no exposure to losses.

An investment in Macquarie Commodity Linked Notes provides an investor with exposure to the price movements of 21 commodity futures which make up 4 of the Goldman Sachs Excess-Return Commodity Sub indices. 

* Indicative rate

Investors can access the performance of Global Commodities with enhanced returns while investing with the security of a 100% capital guarantee.

Macquarie Bank Capital Guaranteed Commodity Linked Notes.

MitonOptimal  win 1^st prize in the Annual Lipper Awards

MitonOptimal are the proud winners of not one but two awards in this year annual ceremony.

The Global Portfolio was awarded 1st place in the Mixed Asset GBP Aggressive Sector whilst its lower risk counterpart Special Situations Portfolio received 1^st place in the Mixed Asset GBP Balanced Sector.

The Global Portfolio 5 Year Anniversary.

The Global Portfolio passed its 5 year anniversary earlier in March.  Sam Liddle, Manager of the fund has consistently delivered superior performance compared to competitors and markets in what has been a challenging 5 year period.  Equally important is that returns have not been delivered via creating risk in the portfolio.

If you would like to find out more about the award winning range of MitonOptimal funds then please do not hesitate to contact me.