The introduction of CPPI to funds is slowly taking off as providers look for a modern version of with-profits. Friends Provident is the latest provider to launch a fund using this protection tool through its Stewardship fund.
This fund is available through its investment bond wrapper and offers investors exposure to the Stewardship fund while providing protection of 80 per cent of the highest price at any one time. This means that, with a launch price of £1, the lowest selling price will be 80p, regardless of market conditions.
This protection comes from daily management of the asset split between the Stewardship fund and the BGI liquidity plus fund and the exposure to the Stewardship fund cannot be more than 70 per cent.
Of course, protection on any fund such as this comes at a price and this is through an increased annual management charge of 1.85 per cent compared with the standard charge of 1.25 per cent. Investors are looking at an effective charge of 0.6 per cent for the protection and in my view this is a reasonable price to pay.
I think the fund is an attractive option for investors who want equity exposure through the Stewardship fund but are not comfortable with being fully invested in equities.
This offers investors a chance of effectively smoothing the returns without the risk of having big MVRs that tie the investor into the product. Friends has provided investors with a clear choice of products from which they can select a fund for their risk profile and it has managed to capitalise on its undoubted strength – the Stewardship brand.
Ryan Hughes is investment analyst at Chartwell Investment Management