View more on these topics

A lifestyle choice from ABN Amro

ABN Amro Asset Management

Capital Protected Lifestyle Fund 2010-2035

Type: Sicav

Aim: Growth for different maturity dates by investing in cash, money market instruments and derivatives linked to the performance of fixed income securities and equities

Minimum investment: Lump sum £250

Place of registration: Luxemburg

Term: Up to 30 years

Investment split: 100% in cash, money market instruments and derivatives linked to the performance of fixed income securities and equities

Protection: 100% of the fund’s highest fund price locked in

Charges: Initial up to 5.25%, annual 1.75%

Commission: Subject to negotiation

Tel: 020 7678 8409

ABN Amro has launched the Capital Protected Lifestyle Fund 2010-2035, a range of structured products with an asset allocation mix tailored to suit each maturity date.

Michael Philips proprietor Michael Both thinks it is interesting that this Sicav is being marketed under the ABN Amro brand rather than the group’s better-known Artemis label.

He says: “Although ABN Amro is no slouch at fund management, this range is not in any way aiming to add value by competent stock selection. The aims are risk and liability management which makes it unusual in the retail arena.”
From the outset the concept sounds well thought out to Both, who thinks it is exactly what many clients who previously would have bought With Profits or something like the Skandia Guaranteed Pension Fund were hoping for. “As those not yet suffering memory loss know only too well, what they got was not always exactly what they expected. IFAs need to be extra vigilant to ensure clients fully understand what the funds are realistically likely to achieve and what the costs and benefits are compared to alternative strategies, no easy task. In this respect, not coming from an insurance company is a distinct advantage, since public perception of that industry is not at an all time high.”

Both thinks that ABN Amro has used the Ucits and Sicav rules to issue a range of maturity dates so clients can select any year from 2010 to 2035 at which their guaranteed minimum value will apply.

He explains: “The funds are only aiming for capital growth. So while the EU Savings directive applies, withholding tax is unlikely to be a drag under present rules and the funds might be particularly attractive for retirement planning within a Sipp, unsecured pension or alternatively secured pension as well as a Pep transfers or Isas where a minimum fund value is sought at a specific point in the distant future.”

He adds that trustees could similarly find these characteristics helpful in meeting their sometimes conflicting obligations. “ I suspect that the product could be very attractive to intermediate and more experienced investors,” he says.

Considering the potential downsides of the fund range Both says: “Patience is not a virtue practiced by many retail UK investors and although the prospectus repeatedly states that these are designed as long-term commitments, I fear some clients may bolt at the first whiff of a market correction and will be unhappy to find just how large the discount applied by the market could be if they wish to redeem.”

He notes that the underlying investments are mostly complex derivatives including over-the-counter swaps and thinks it is unrealistic to expect a typical retail investor to understand how these work or to grasp the importance of liquidity. “I suspect they may struggle to reconcile the term protected in the title with the volatility of the net asset value. ABN Amro is careful not to even hint at the “G” word except in relation to the maturity date, and IFAs must be equally meticulous otherwise the FSA could be only too ready to encourage assisted fraudulent claims from people who will swear blind they were repeatedly told the value was guaranteed never to fall – which it most certainly is not,” he says.

Both suggests the closest competitors are probably the Fidelity Wealthbuilder Target Funds which have a similar aim but very different process. He also suggests lifestyling funds from insurance companies such as Scottish Life Managed Strategies and Scottish Equitable Lifestyle options and thinks Skandia Protected portfolios might appeal to certain clients.

Both concludes: “ABN Amro clearly informs investors that all investments involve risks and there is no assurance that a Fund will achieve its investment objective. The plan is governed by Luxembourg Law and the risk factors are written to be read by a responsible adult, presumably who understands the meaning of “caveat emptor”. The UK FSA would have wanted piffle worded not to alarm a baby and then blamed the distributor if anything frightening like a share price change happened, so I guess UK based IFAs had better add the standard codswallop for their own protection.”

BROKER RATINGS

Suitability to market: Good
Investment strategy: Good
Charges: Good
Adviser remuneration: Good

Overall 8/10

Recommended

Manual labour

Compliance consultant and expert Adam Samuel says the FSA’s mystery shopping exercise shows how deeply the equity-release problems go

Serial crops

Continuing to look at how transitional serial interest relief can apply in inheritance tax planning

Standard dismayed at 14% claim refusal rate

Standard Life paid out 9.8m in critical-illness claims in the first half of this year and says it was disappointed that 14 per cent of claims were declined. Six per cent of claims were declined because the claim did not meet policy definitions and 8 per cent were declined due to non-disclosure. At point of […]

Rayner Spencer Mills: Why we rate the Artemis US Select Fund

Ken Rayner and Graham O¹Neill from RSM explain why they rate the fund, its investment process and how it can be used in a portfolio The Artemis US Select Fund became a RSM ‘rated’ fund earlier this year. In this video, Ken Rayner and Graham O’Neill explain the fund’s investment approach, why they rate it, […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment