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Skandia gets active

Skandia&#39s protected portfolio investment is a capital-protected bond linked to a basket of actively managed funds rather than a passive index.

The bond has two investment options and is linked equally to four funds &#45 Schroder UK Mid 250, Fidelity special situations, Invesco Perpetual corporate bond and the Norwich property trust.

The maximum protection option provides a higher degree of capital protection but lower returns than the strategic growth option. Investors with the maximum protection option will receive all their original capital at the end of the term, regardless of how the funds perform. They will also get 100 per cent of the average growth in the funds. The strategic growth option returns 80 per cent of investors&#39 capital regardless of the performance of the funds, plus 200 per cent of the average growth in the funds.

Most current structured products are linked to the performance of the FTSE 100 index, while this one offers of the ability to outperform an index rather than follow it. Earlier this year Newcastle Building Society brought out the guaranteed five star bond which offered just 75 per cent of the average growth across five funds and a full capital guarantee.

The Skandia product takes the combination of capital protection with active fund management further by offering different levels of capital protection. However, the use of averaging across the four funds means the potential returns will always be lower than investing directly in the funds.

According to Standard & Poor&#39s, the Fidelity special situations, Schroder UK mid 250 and Invesco Perpetul corporate bond funds are first quartile based on £1,000 invested on a bid to bid basis with net income reinvested over three years to September 15, 2003. The Norwich property trust is ranked third out of three funds on the same basis.


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