Skandia is offering investors the chance to invest in a capital-protected Isa that is linked to the performance of four actively managed funds for a term of six years and three months.
Fidelity special situations carries the highest weighting in the portfolio at 30 per cent, Invesco Perpetual corporate bond and Norwich property each represent 25 per cent, while the remaining 20 per cent is linked to the Schroder UK Mid250 fund.
The Isa has two options for different risk profiles. Option one returns 100 per cent of investors' original capital and 100 per cent of the quarterly average growth of the funds. Option two has a lower minimum capital return of 80 per cent, but higher growth potential at 200 per cent of the average quarterly growth in the funds.
Most capital-protected Isas are linked to stockmarket indices rather than a basket of funds, although some similar products have opted for actively managed funds. Newcastle Building Society's guaranteed five star bond, which is available as an Isa, is a similar product to Skandia's. It is linked to five actively managed funds over a five-year term. Investors get 100 per cent of their original capital returned, but investment growth is capped at 75 per cent of the average monthly growth in the funds.
Some cautious investors may choose Skandia's offering because growth is not capped and there is a choice of capital protection options. However, the quarterly averaging it is based on could restrict growth potential more than the Newcastle's monthly averaging. But the flip side of this is that quarterly averaging may be a greater cushion against poor performance than the Newcastle product's use of monthly averaging.
