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Premier protects property fund

Premier Fund Managers has brought out the Premier Protected Property Plan, a capital-protected bond linked to the performance of the Premier Pan European property share fund for six years.

The Premier Pan European property share fund was launched in July 2005 and aims to provide income and growth by investing in listed property companies and investment funds that invest in property companies.

The fund is managed by Alex Ross, who joined Premier in July 2005 to manage this fund. He previously spent seven years at Aberdeen, running the Aberdeen property share unit trust.

According to Premier, property shares have several advantages over bricks and mortar. They are more liquid, enabling fund managers to buy and sell holdings quickly and easily. The property shares in which the underlying fund invests are also spread across European countries, thereby diversifying risk away from the UK.

Ross will focus on good quality commercial property assets while avoiding speculative property companies and residential property companies because their valuations look too expensive. He will also be taking advantage of the introduction on Reits in Germany and Italy, with opportunities in Scandinavia and Eastern Europe at a later date.

Investors who access this fund through the Premier protected property plan will receive a full capital return if they hold their investment for the full six years. They will also receive 100 per cent of the growth in the fund.

To calculate the returns, the closing price – or net asset value – of the underlying fund is recorded on July 6, 2007 and compared with an average of monthly prices during the last year of the term. The final return is based on the difference between these two prices.

This product’s full capital protection may be useful to investors that are keen on property but who want an extra comfort factor. However, property shares tend to have a higher correlation to equities than bricks and mortar so may not achieve as much diversification as some investors want. Another potential drawback is that people who invest directly in the fund can benefit from income distributions, but there is no income option for those who invest through the plan.

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