Merrill Lynch Investment Managers has brought out the second version of its defined returns fund.
Merrill Lynch defined returns two is a closed-ended split-capital offshore investment that is domiciled in Dublin. It is available for UK investors and offers income or growth for the more cautious client. The fund is designed for those who want to invest in the stockmarket but who want to protect their investments from any sharp falls.
The fund will invest in a portfolio of 30 global stocks that cover a diverse range of sectors and geographical areas around the world. These include companies such as Glaxo SmithKline, Aventis, Volvo, ICI, Dixons and Deutsche Bank.
If, over the three-year term, none of the 30 companies fall in value by more than 20 per cent from their starting levels, the investor will get back all their original investment plus any returns. However, if any of the companies fall in value by more than 20 per cent in the case of the growth option, or 10 per cent in the case of the income option, then the returns will diminish by 1 per cent for each 1 per cent fall in value.
Defined returns two will depend on careful stock selection on the part of the management team. It is similar to the platinum income fund from Canada Life, which also has a growth or income option and which invests in the Nasdaq 100 index over a three-year term. However, unlike the Merrill Lynch product any fall in the index of more than 20 per cent leads to a corresponding fall of 3.3 per cent in value for every 1 per cent fall in the index.
According to Standard & Poors the Merrill Lynch defined income & growth fund is ranked 22 out of 42 funds, based on £1,000 invested on a mid-to-mid basis with gross income reinvested over one year to October 25, 2001.