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NU’s CPPI fund uses active and passive components

Norwich Union has created an Oeic fund of funds which applies constant proportion portfolio insurance to a portfolio of six Norwich Union funds and short-term cash deposits.

As the name suggests, the Norwich active protector fund, first revealed in Money Marketing last week, will be divided into an active component and a protected component.

The active component will consist of Norwich Union’s UK equity income, UK growth, UK Index tracking, UK smaller companies, managed high income and corporate bond funds while the protected component will invest in short-term cash deposits. At launch, 100 per cent will be invested in the NU funds and using CPPI, this will be reduced in favour of the cash deposits when markets fall.

The fund’s use of CPPI enables its share price to be protected from falling below 80 per cent of its highest value through a derivatives-based contract between Norwich Union and UBS.

Explaining why the fund is fettered, Norwich Union investment product manager John Oswald says: “We have nothing against the multi-manager approach.We just decided we have enough funds of our own to combine equities and fixed interest with passive and active management.”

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