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Basket weave

Meteor Asset Management, headed by the very bright Graham Devile, has produced two excellent capital-protected plans linked to commodities. One is the Meteor galaxy protected commodities plan and the other is a similar plan based in dollars.

The UK plan pays out 160 per cent of any growth in the commodity basket with 100 per cent capital protection at the end of four years or 210 per cent of any growth with 90 per cent capital protection.

The US plan is similar except the 100 per cent capital-protected plan pays out 150 per cent of any growth and the 90 per cent capital-protected plan pays out 225 per cent.

This is how the plan works. Capital protection is provided by investing in a note issued by a major financial institution with a current credit rating of at least A+ by Standard & Poor’s and the balance is invested in a basket of eight commodities in equal proportions. This consists of aluminium, Brent oil, copper, lead, natural gas, nickel, WTI light crude oil and zinc.

Demand for commodities from China, India and Brazil is likely to expand enormously through huge infrastructure projects and growing consumption. It is also estimated that within 30 years there will be more cars on the roads of India and China than in the rest of the world put together.

China is already the world’s biggest importer of copper and aluminium and Chinese consumption of oil per head is still not even 10 per cent of that of the US.

These investments should be tax-free through pension plans. However, returns to the individual investor are likely to be higher than average returns from equities and property over the next four years even after tax.

Certainly, all pension plans and bigger growth portfolios ought to think about diversifying into this plan.

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