Friends Provident has added a smoothed managed fund with a
protection feature to its fund range for the investment portfolio bond
The UK safeguard optimiser fund is a unit-linked fund that is being
marketed by Friends Provident as an alternative to with-profits
because of the smoothed returns it provides. The protection feature
means 80 per cent of the highest unit price is protected if the
The equity exposure is achieved by investing in the Isis All Share
index tracker fund and this will represent a maximum of 70 per cent of
the overall portfolio. At least 30 per cnet of the overall portfolio will be
invested in cash through the Barclays Global Investors liquidity plus
fund. The underlying fund invests in sterling money market securities
that have a three-month duration.
The equity weighting in the Friends Provident fund will be reduced if
equity markets fall and the amount investment in cash will increase
accordingly. If the markets rise, the cash weighting will be reduced
and the equity content increased.
Cautious investos in the investment portfolio bond who have turned
away from with-profits funds as a result of bonus cuts and negative
publicity may look at this fund as an alternative way to obtain
smoothed returns. The ability to lock in 80 per cent of the highest unit
value may be useful for investors who are worried about the effect of
stockmarket falls on their returns.
The protection feature may make this product lower-risk compared
with with-profits funds. However, relying on an index tracker to provide
growth means there is little scope to outperform the index through
active management and investors are largely at the mercy of an
increasingly concentrated index.