Friends Provident has introduced a unitised with-profits fund that is available to investors through its investment portfolio bond.
The fund is aimed at cautious investors who are not ready to climb the stockmarket ladder and who are looking for a home for their cash at a time when building society accounts do not pay much interest.
A regular bonus is paid at the current rate of 4.75 per cent a year and there is a final bonus rate of 2 per cent. Unlike previous Friends Provident with-profits funds, where investors qualified for the final bonus after five years, they qualify from day one with this fund. Allocation rates range between 100 per cent and 102.25 per cent, depending on the amount of the initial investment. These rates are boosted by 2 per cent for investments made before November 9, 2001.
The smoothing effect of with-profits funds, which shields investors from sharp movements in the stockmarket, may seem attractive to investors when it is difficult to know whether to buy or sell stocks and shares. However, because the underlying assets of the with-profits fund are dependent on the stockmarket, its movements are still reflected in the bonus rates.
According to Standard & Poor's, the Friends Provident with-profit 4 fund is ranked 13 out of 26 funds based on £1,000 invested on a bid-to-bid basis with net income rienvested over three years to October 1, 2001.