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Nvesta gathers momentum


Momentum Tracker Plan

Type: Capital-protected bond

Aim: Growth linked to the performance of the FTSE 100, iBoxx Sterling Gilt Index and EPRA UK indices

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

Term: Six years

Return: 100% of the weighted growth in the FTSE 100, iBoxx Sterling Gilt Index and EPRA UK indices

Guarantee: Original capital returned in full regardless of the performance of the indices

Closing date: September 2, 2005

Commission: Initial 3% or initial 2% plus 0.25% renewal

Tel: 020 7454 0704

Chase de Vere research manager Justine Fearns thinks the Momentum Tracker shows innovative thinking on behalf on Nvesta. “Its bringing an element of asset allocation to the structured product arena that we have not seen before through the quarterly reviews of three indices over the full six year term. The Indices have little or no correlation and are the FTSE 100, iBOXX Sterling Gilt and EPUK the UK section of the Global Real Estate Index. Investors should have a degree of familiarity and therefore comfort with them,” she says.

Fearns regards the asset allocation as very basic and points out that it starts with equal weightings between all three indices. She says: “At the end of the first quarter and every quarter thereafter, the index split will be re-weighted 60 per cent, 30 per cent and 10 per cent in favour of the best performing index.”

Although Fearns notes this as a backward rather than forward looking approach to asset allocation, she believes Nvesta should still be applauded for trying to incorporating this into its product as it fits with the thinking of advisers and the regulator in todays climate.

Compared with other products that are available, Fearns thinks this one appears to offer value for money, with 100 per participation in the indices and 100 per cent capital protection through S&P A-rated companies. “Nvesta could have gone for stronger rated institutions but again this would have had an effect on the price of the product and Im comfortable that this level of protection is appropriate,” says Fearns.

Turning to commission, Fearns notes it is standard but says: “Nvesta does offer some flexibility with potential trail commission that equates to a total of 3.25% over the life of the plan. Again, the company is trying to think about what features may be useful to the adviser. Also, the literature is simple and straightforward.”

Considering the less attractive features of the product Fearns says: “Its difficult to think of Nvesta without thinking of ties to or legacy of Eurolife. Nvesta has come a long way since the Eurolife days and is full of knowledgeable individuals. It appears committed to making its business work but it is going to be tough and made tougher still as Nvesta is up for sale due to re-structuring that has taken place at group level.”

She also feels it would have been nice to see the product taxed to capital gains but can understands that Nvesta does not want to add additional or unnecessary costs to its clients by having a different structure.

Fearns concludes: “I mentioned that the asset allocation was backward rather than forward looking and am going to mention it again as it is somewhat reminiscent of performance chasing which we try to steer investors away from. I still think Nvesta has done as reasonable job but this is something to be aware of.”


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

Overall 5.5/10


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