Rothschild Asset Management has established the protected wealth management service, a portfolio management service that protects the value of the investment against stockmarket falls when the investor dies.
The service has three strategies - UK capital growth, UK equities and income - which are unit trust funds of funds. The UK capital growth strategy invests mainly in UK equities, with the rest going into overseas equities. The income strategy aims for high income and some capital growth. It will hold at least 50 per cent in fixed interest securities, while the remainder is invested in UK equity income funds. The international capital growth strategy aims for growth by diversifying across global stockmarkets.
When the capital is invested, 105 per cent of that amount is protected and this is reviewed each year. The protected value rises in line with the market value, but if the market value falls, the protected value will remain at the previous level.
If an investor dies before the age of 75 when the protected value is more than the market value, the shortfall is paid out up to a maximum of £100,000. If the investor lives beyond the age of 75, the investment will then be automatically switched into Rothschild's unprotected wealth management service.
No single fund management group performs well in all areas and this service allows investors to diversify across countries, fund management groups and asset classes without the burden of excessive paperwork. The protection feature could be attractive to investors who want to limit the effects of stockmarket volatility for the benefit of their heirs. However, the downside is that the beneficiaries of investors who live beyond 75 cannot take advantage of this capital protection feature.