Sarasin Investment Management has unveiled the Sarasin guaranteed portfolio, a capital protected fund linked to the Sarasin CI globalsar sterling balanced fund, which is a Guernsey-based unit trust.
The underlying fund has a 16-year track record and invests globally in a combination of equities, bonds and cash. Its objective is to achieve capital growth with lower risks than a pure equity fund. Current holdings include gilts, Cisco Systems, Tesco and Vodafone.
Investors will get 100 per cent of any growth in the underlying fund, plus any income distributed by the fund, which has traditionally been around 3 per cent a year but this is variable.
The capital-protection offered means that investors will get their original capital back at the end of the five-year term less the charges levied on the fund. The capital protection is provided by the A-rated Rabobank, but it will not apply if the investment is cashed in before the end of the term. Investors who sell their holding before the end of the term will pay an early exit fee, which ranges from 1 per cent in year one to 0.25 per cent in year four.
This structured product takes capital protection into the realm of active management, as the underlying fund can shift its asset allocation according to the current market conditions. For example, if the fund value falls the exposure to cash will be increased. If the fall is so dramatic that 100 per cnet goes into cash, it will not go back into equities and investors will get their capital back.
This product differs from the rarer structured products that are linked to a portfolio of funds, such as it allows investors to participate in the income distribution of the underlying fund.
Although the structure is simple and the charges are transparent, investors would need to understand how the underlying fund works. It may be most suitable to people who are used to investing directly in equities and who may be returning to the markets during the current static period.