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Product Matters

If you were to take your average with-prof

its bond and throw away the bad bits, you would probably end up with something that looked like the new F&C With Prospects fund. Unfortunately this is not entirely a good thing.

If the name was not a giveaway, the fund is pitched at the same market as with-profits bonds. It aims to deliver long-term capital growth from a balanced portfolio while protecting investors from the ups and downs of the stockmarket.

Subject to FSA approval, it will publish an annual prospective growth rate, indicating to investors what returns they might enjoy from the fund over the year ahead. The actual underlying share price will move daily in line with asset value movements, so investors will always know what their investment is worth.

The basic product structure is straightforward, it can be sold as an Isa, an Oeic or a Pep transfer. It has a 5 per cent initial charge, and a 1 per cent annual fee, these cover the cost of 4 per cent initial commission and a 0.25 per cent fund based commission, in terms of simplicity and transparency, it scores well.

The investment mix is conservative, with a stronger weighting towards fixed interest than most with-profits funds, so the fund will probably struggle to compete with them in the long term.

This could prove to be its Achilles heel. Unless Sandler really does rewrite the ground rules, absolute returns will continue to matter more than almost anything else. For all their perceived shortcomings, no one has yet come up with a really convincing alterative to the with-profits bond.

Tom McPhail is pensions development manager at Torquil Clark

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