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Clerical picks protected path to diversify funds

Clerical Medical is looking to move into the protected fund market next year in a bid to diversify its funds and provide more options for investors burnt by the recent downturn and who want an alternative to with-profits.

Wealth creation marketing manager Adrian Smith says it is too early to give details of its plans as it is a “work in progress” but says Clerical is looking at its mutual fund range and believes there are good opportunities for offering protected funds within the Oeic environment.

He says there are opportunities to launch new styles of protected funds offering certain levels of guarantee and that the area has the potential to bring in billions of pounds to the market annually.

“If you are going to invest, then protected funds are part of the range of investment options. To some extent, I think what has happened in the with-profits market indicates that there is an appetite for funds with some smoothing and guarantees and what you will probably find is that some of that money will go towards different types of funds that offer similar benefits,” he says.

Smith says he does not believe that with-profits is in terminal decline, saying that recovery is possible as long as the products adapt and insurers work harder at offering transparency.

He says: “Recovery will also come about because it is a fact that a version of with-profits is one of the stakeholder suite products so that will give it some emphasis although it is probably not going to be as big as it once was.

“What you will see is a fragmentation and money which used to go into with-profits will probably go across to other types of investments.”

Smith says Clerical is optimistic about the future as the demographic drivers are there to strengthen demand. He says: “We are getting more older people who are generally going to be quite wealthy, in part because of property.

“Allied to that is a Government agenda that is trying to force the pace of change in the industry to rebuild confidence and also to push people towards more private provision. Those two factors together indicate that there is going to be lots of potential demand.”

Underpinning this is a recovering stockmarket which he believes will generally improve the investing environment. “It has been tough and we are not out of the woods yet but you have to take into account that the indications are good for those that can stay the pace,” he says.

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