The Prudential UK 70 per cent and 80 per cent protected funds provide exposure to the FTSE 100 index and a choice of capital protection levels.
The funds invest primarily in Barclays Global Investors’ FTSE 100 total return index tracker but an automated process increases exposure to cash when the stockmarket falls and decreases it when the market moves up.
This constant proportion portfolio insurance model means equity exposure can vary dramatically depending on the performance of the FTSE. The cash exposure is gained through investing in the Barclays Global Investors sterling liquidity plus fund.
The CPPI model means that each time the fund rea-ches a new unit price high, either 70 or 80 per cent of that value, depending on the fund selected, is protected, even if the price subsequently falls.
The equity and cash mix is worked out as 3.5 times the difference between the unit price and the protected price.
Annual charge is either 2 per cent with no initial charge or 1.7 per cent with a 5 per cent initial charge at the bond level. This is offset by an initial unit allocation of 100-103.75 per cent, depending on the amount invested.
Allocation of 100-101.5 per cent is available on the no-load option. Minimum investment is 10,000.
Head of proposition development Stuart Meiklejohn says: “There has been strong IFA demand for protected funds in our unit-linked bond and 80 per cent of our new business is going into low and medium-risk funds.”