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Skandia protects portfolio

Skandia’s protected portfolio investment range provides capital growth linked to an equally weighted portfolio of five externally managed funds with varying degrees of capital protection and return over a six- year term.

The underlying portfolio of the protected portfolio investment contains the Framlington equity income, Schroder UK mid-250, New Star UK alpha, Norwich property trust and Invesco Perpetual corporate bond funds.

Investors have three main options to choose from. Averaged return offers a choice of 100 per cent capital protection plus 100 per cent growth in the portfolio under the maximum protection option or 80 per cent capital protection plus 200 per cent growth in the portfolio under the strategic growth option.

Assured return offers a minimum return of the original capital plus 17 per cent growth, with maximum growth potential of 50 per cent of the growth in the underlying funds. Finally, absolute return offers a full capital return plus 70 per cent growth at the end of the term.

Unlike the majority of structured products which are linked to one or more indices, the Skandia protected portfolio investment range provides access to diverse portfolio of actively managed funds. These are spread across a mix of asset classes and investors are protected from the risk of capital loss that comes with direct investment in the funds.

Keydata recently issued a similar product linked to funds from BGI, Threadneedle, New Star, JP Morgan and First State over five years but this is now closed so this Skandia product is unique.

However, some investors may feel it is not worth paying for the capital protection by giving up some of the growth in the funds. Another potential drawback is that the portfolio is fixed at the outset, both in terms of weighting and the selection of funds, so investors could be locked into the portfolio with no opportunity to shift the weighting towards the better performing areas or replace funds if necessary.

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