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Kay to five funds

Keydata Investment Services

Protected Portfolio Plan

Type: Guaranteed equity bond

Aim: Growth linked to the performance of the BGI Liquidity Plus, Threadneedle American, New Star European Growth, JPMorgan Premier Equity Growth and First State Asia Pacific Leaders funds through conservative, balanced and dynamic portfolios

Minimum-maximum investment: £4,000-no maximum, Isa £7,000

Term: Five years

Return: 100% of the growth in the best performing portfolio at the end of the term

Guarantee: Original capital returned in full regardless of the performance of the underlying investments

Closing date: September 1, 2006, August 18, 2006 for Pep/Isa transfers

Commission: Initial 3%

Tel: 020 7710 6906

This plan from Keydata is linked to the performance of five investment funds through three portfolios, which hold different weightings in each fund. The final return is based on the average growth in the best performing portfolio.

Chase De Vere Financial Solutions research manager Justine Fearns notes that the returns are linked to five funds, which makes a big difference from the protected FTSE products that have been dominant for the last few years. “Not that I’m knocking the FTSE products, it just nice to have something different in the market.,” she says.

The Protected Portfolio Plan offers diversification on a number of levels, including company, style, geography and asset class, although Fearns regards the latter as limited.

“Protection is through medium-term notes that are AA-rated by S&P. This is pretty much as good as it gets – you cannot get much better,” she says.
Other good features are the product’s availability through wrappers such as Sipps and Isas, a low minimum investment of £4,000 for Isas and returns chargeable to capital gains tax

However, there are aspects Fearns does not like. “I can’t get past the question as to how much do you pay for protection and do you really need protection on a properly asset allocated portfolio?” she says.

She adds there is also an argument that if investors want exposure to the returns that can potentially be generated by the underlying funds, they should just go for it with a proportion of their portfolio. If not, they should be in cash or an alternative type of product according to Fearns. “Putting my personal opinions aside, some investors do want the type of protection offered by this type of product and are willing to forego some of the upside to pay for it,” she says.

Fearns also mentions that investors need to be aware that the monthly averaging on this product is for the full five-year term. “ This has the potential to substantially reduce the returns seen from this portfolio of funds but if investors are comfortable with that, it shouldn’t be a reason not to invest,” she says.

In Fearns’ view, good quality literature that explains everything in detail has been a problem for Keydata. She thinks this product’s literature is ok but the monthly averaging is not detailed enough, which is a big downfall as it impacts on the potential returns.

“The main competition will come from Skandia’s Protected Portfolio Investment Plans. Slightly different, but I think still worth mentioning, are the Barclays Cautious and Balanced Portfolios, which have a decent track record.”


Suitability to market: Average
Investment strategy: Good
Adviser remuneration: Average

Overall 6/10


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