The PruFund investment plan is a single premium with-profits investment plan with a choice of two funds. The PruFund growth fund aims for growth by investing in global equities, property, corporate bonds, alternative assets such as convertible bonds and hedge funds, and cash. The PruFund growth and income fund invests in the same asset classes but has a higher proportion of corporate bonds and less in equities.
Volatility is reduced by gradually increasing the unit price of the funds in line with the rate that Prudential anticipates the funds to grow by . The adjustment process, or smoothing, is transparent. If the actual fund value is between 5 per cent and 10 per cent higher than the unit price, half of the difference will be used to increase the unit price and the balance will be used to raise the expected growth rate over time. If the actual fund value is at least 10 per cent higher than the unit price the unit price will be raised to take it 2.5 per cent lower than the actual fund value.
If the actual fund price is at least 5 per cent lower than the unit price, the same formula will be used to make vice-versa adjustments.
Investors can make withdrawals or take regular income at any time up to a 5 per cent limit. If they go beyond the limit they will pay an early cash-in charge for either three or five years.
The charging and commission structure is also transparent and flexible, based on whether regular income is taken and how much commission the adviser takes. This improves on traditional with-profits where investors receive the investment return after charges have been deducted but do not know exactly what the charges are.
However, one drawback to greater transparency is greater technical information on how the funds work and charging/commission options, which some clients may find difficult to follow.