Sarasin has brought out another issue of Sarasin Guaranteed Portfolio – globalsar principal guaranteed note.
Issue five of this capital-protected fund invests entirely in 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.
Investors will get 100 per cent of any growth in the underlying fund plus any income distributed by the fund, which will be 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 Dutch bank 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, and it differs from the more common index-linked products which hold derivatives as the underlying investment. This product also differs from the rarer structured products that are linked to a portfolio of funds, such as Skandia's recent offering, as it allows investors to participate in the income distribution of the underlying fund.
Skandia's Protected Portfolio Investment offers a range of risk and reward profiles - averaged, assured and accelerated - whereas this focuses on one risk and reward profile with the intention of maintaining simplicity. However, some investors could still find it difficult to understand the relationship between the underlying fund and the capital-protected wrapper.