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L&G tracks Investec funds

Legal & General has introduced the fund tracker capital guaranteed bond, which is linked to the performance of the Legal & General Investec moneybuilder fund.

The bond has two five-year investment options, which both have a five-year term. Option one provides 100 per cent of the growth in the moneybuilder fund, plus a full capital return regardless of the performance of the fund.

Option two provides the greater of 10 per cent of the original investment or 75 per cent of the growth in the moneybuilder fund, plus a full capital return regardless of the fund performance.

The moneybuilder fund combines two Investec funds, cautious managed and target return Fund, with the aim of performing in all market conditions.

Cautious managed can vary its split between equities and fixed interest within certain parameters as market conditions change. It comprises 60 per cent of the moneybuilder fund, which can rise to 70 per cent. The fund focuses on the long-term potential of undervalued stocks and provides diversification by asset class, sector and stocks.

Target return holds a range of interest bearing investments and derivatives to achieve positive returns above a cash benchmark regardless of market conditions. It will comprise up to 40 per cent of the moneybuilder fund.

To calculate the returns of the bond, the moneybuilder fund price is recorded at close of business on November 26, 2008 and compared with the average monthly closing price over the final 12 months of the term.

This product is unusual in that it is linked to a portfolio of two funds rather than the more common indices or share baskets. It may provide an introduction to investment funds for investors who are stepping up from savings accounts because interest rates are low.

However, there is a price to be paid for the comfort factor. The lower growth potential for option two reflects the cost of extending the guarantee to a minimum return, while averaging in the final year, which can protect investors on the downside, may constrain growth in a rising market.


Phoenix GAR vote

Phoenix is preparing to ask some policyholders with guaranteed annuity rates to vote on removing the GAR. It says removing the GAR will allow it to increase the current fund value of policies and the equity-backing ratio, leading to improved retirement benefits for policyholders.

Lloyds leads way back with RMBS

Lloyds Banking Group has become the first bank to issue a prime residential mortgage-backed security in over a year. The £2.82bn deal will be made up of prime mortgages from Halifax.


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