The fund has a target return of between 2 and 3 per cent above the Bank of England base rate. With the base rate at 4.75 per cent, the target return is currently between 6.75 and 7.75 per cent.
To achieve this level of return the fund invests in a money market portfolio and an actively managed currency fund which is known as the managed account. The interest from the money market portfolio is invested in the managed account which incorporates the views of seven investment teams around the world.
The capital protection is provided through an agreement with Deutsche Bank. As a consequence of getting back their original capital regardless of the performance of the underlying investments, investors have restricted access to their money. there is a two day window every six months which enables investors to withdraw their money without losing the capital protection. Withdrawals outside this window will mean a dilution levy will apply.
Although any gains made in the previous six months are locked in, the capital security is not the same as offered by a bank or building society account. A default by any of the financial institutions involved in the product may mean that investors would get back less than they out in.
The main problem with this fund is that the level of income is not guaranteed, so there may not be any income at any given six-month period. The knock-on effect of thus would make it difficult to reach the target return and this potential problem may leave some investors and advisers unconvinced about this fund.