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Defaqto on Fidelity International’s Equity Growth Defender Fund

View of Defaqto insight analyst for funds Fraser Donaldson

Donaldson says: “This a fund that protects growth by the formulaic manipulation of cash and equity. As markets fall, cash is increased. As markets rise equity investment is increased. The 80 per cent protection level is not guaranteed, but should be achieved as long as equity investment does not fall in value by more than 20 per cent in one day.

“Investments offering guarantees or downside protection are going to appeal to the more cautious investor, particular in extended periods of market volatility and uncertainty. Usually the protection is put in place by employing the appropriate derivatives but this comes at an additional cost to the client, not to mention the possibility of bringing in counterparty risk.

“However, Fidelity’s protection comes at no real additional cost and the anticipated TER of 1.46 per cent appears very competitive. As with all guaranteed and protected products, there will probably be a price to pay somewhere along the line. In this case, it is likely that there will be a drag on performance on the upside. As markets are rising, cash is moving in to equity so may not perform as well as a fund that is fully invested.

“This kind of fund will still appeal to many nervous investors. Structured product providers may argue that they can offer better protection and capture more of the upside. This may be true, but Fidelity’s Oeic structure means that the investment is liquid and flexible, so clients can switch out of the fund without additional penalty.”


HSBC adds hedged share classes to absolute return funds

HSBC Global Asset Management has launched hedged sterling share classes for its HSBC GIF European equity alpha and HSBC GIF global emerging markets equity alpha funds. The group launched both Ucits III absolute return funds in April this year. With the new share class, UK investors can avoid the associated currency risks.

Using a market neutral […]

Gregor Watt

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The aim when I set out on this experiment was to see if it was possible and practical to study for a full set of RDRcompliant exams while holding down a full-time job. If I did not realise the answer initially, I certainly do now. The answer is yes but it is difficult and as […]

Protection firms fear offset review

The impact of a combined Treasury and HMRC review of protection offset tax rules could see £350m of commission taken out of the market, according to Aviva. Richard Verdin, protection director at Aviva, says the current review is likely to scrap rules that allow providers with investment management businesses to offset the costs of writing […]

The Downsizing Delusion: Why relying exclusively on your home to fund your retirement may end in tears

By Steve Webb, director of policy The British obsession with homeownership can have dangerous consequences. A recent survey by Barings¹ found that up to three million people of working age were planning to rely wholly on the value of their home to fund their retirement. We are not talking about people investing in buy-to-let or […]


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