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Scottish Equitable offers a safe haven in corporate bonds

Scottish Equitable’s investment range is expanding with the introduction of the extra income fund.

With the stockmarkets looking increasingly volatile, Scottish Equitable has aimed this unit-linked fund at cautious investors who are looking for an investment that offers a safer haven in stormy economic weather and which also provides income.

Extra income will invest entirely in investment-grade corporate bonds that have Standard & Poor’s and Moody’s credit ratings of between AAA and BBB. The fund will be divided into three different areas of corporate bonds. Twenty-eight per cent will be in short-term bonds with terms of up to five years, 40 per cent will be in medium-term bonds with terms of between five and 15 years and 32 per cent will be in long-term bonds with terms of more than 15 years.

Some examples of the companies that these bonds belong to include CGU, Glaxo-Wellcome, Whitbread, Brixton Estates, TotalFinaElf, Abbey National and Barclays.

Deutsche Asset Management’s corporate bond + fund is similar in aim and investment area to the Scottish Equitable product. This is also aimed at the cautious investor seeking income from investing in corporate bond funds. However, the Scottish Equitable fund is safer as it invests 100 per cent into investment-grade bonds, compared to 80 per cent for the Deutsche product.

According to the Association of Unit Trusts and Investment Funds, average growth in the UK corporate bond market from August 2000 to August 2001 would have seen £1,000 grow to £1,062.87.

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