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Keydata income plan will invest in insurance policies

Keydata is offering a secure income bond which aims to pay 7.5 per cent annual income over five years without relying on equities.

The fund will invest in a mix of cash and insurance contracts. It is designed to appeal to income investors who are put off by the perceived risk of investing in equities or high-yield bonds.

It invests in corporate protec-tion policies, which it buys from companies when the insured individuals retire. Policies mature when the ex-employees die. They are priced on a KPMG model that is stress-tested every six months to ensure accuracy.

Risk is controlled through asset allocation and issuers of insurance contracts in the portfolio must have a minimum A rating from Standard & Poor’s.

The fund offers trail commission, despite being closed-ended allowing IFAs to rebate initial commission and switch clients out of equity products without penalties. Minimum investment is 4,000. The fund closes on September 16, 2005.

Hedley Asset Management managing director Mike Shaw says: “Recommending this type of product, you have to look very carefully at who it is underwritten by. Generally speaking, we do not recommend such products to our clients.”

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