Type: Unit-linked fund for investors in the Prudential flexible investment plan
Aim: Growth by investing in fixed interest, cash, equities and property
Minimum investment: Lump sum £5,000
Investment split: 61.2% corporate bonds, 16.6% UK equities, 7.4% overseas equities, 6% property, 8.8% cash
Charges: Annual 1.45% for initial charge version of wrapper product, annual 1.75% for no initial charge version of wrapper product plus wrapper product charges
Commission: Dependent on wrapper product
PruFund cautious is available to investors in the Prudential flexible investment plan. It invests in the Prudential with-profits fund and will be managed by the Prudential Portfolio Management Group. A protected version is also available which locks in gains through a fifth year anniversary guarantee. There is an extra 0.75 per cent annual charge for this, but the charge is discounted to 0.5 per cent until the end of the year.
Looking at how the fund fits in to the market, Highclere Financial Services partner Alan Lakey says: “Investment advisers will be advising many of their clients to invest in equities whilst prices are low, but the mindset of the typical investor will err towards caution and for this, if no other reason, the launch is well timed.”
Lakey says that unlike many cautious funds which invest around 50 per cent in growth stocks and deserve the term balanced, this fund really is cautious. He points out that it has 24 per cent in equities and 6 per cent in property, with the remainder going in to corporate bonds and cash.
Lakey says the annual charge varies between 1.45 per cent and 1.75 per cent, with an additional 0.75 per cent for the initial five years if the protected option is chosen. “This is rather steep and investors will have selected the fund on the company’s name and financial strength as much as anything else.”
He notes that the fund fact sheet basic details but fails to advise of the major holdings or the geographic spread. “This is basic information that advisers surely require,” he says.
Turning to the potential drawbacks of the fund Lakey says: “The Pru has a leading with-profits fund, but it is difficult to take a fund on trust, particularly when it has relatively high charges. An initial discount assists, but the charges still seem excessive.”
Scanning the market for potential competitors Lakey says: “Initially the fund is only available to flexible investment plan holders and this means that it will face competition from established cautious funds operated by Gartmore and Investec plus Ecclesiastical’s higher income fund.”
He adds that fans of multi-manager funds will also have favourites such as Jupiter Merlin income that they can select through the investment plan.
Summing up Lakey says: ‘Choice is always welcome but I cannot believe that new investors will be enticed by this launch. It may prove appealing to existing flexible investment plan investors looking to diversify.
Suitability to market: Good
Investment strategy: Good