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Skandia weaves fund basket



Type: Capital-protected bond

Aim: Growth linked to the performance of Norwich Property Trust,
Fidelity special situations, Invesco Perpetual corporate bond fund,
Schroder Mid 250 fund and Merrill Lynch International Investment
Fund UK

Minimum-maximum investment: £5,000-no maximum,
£3,000-£7,000 Isa

Term: Five years

Guarantee: Maximum protection option – Original capital returned in
full regardless of performance of the index. Strategic growth option&#45
80% of original capital returned in full regardless of performance of

Return: Maximum protection option &#45up to 100% growth at end of
term. Strategic growth option &#45 up to 200% growth at end of term
Closing date: January 12, 2004, December 29, 2003 Isa/Pep

Commission: Initial 3%

Tel: 0800 243 509

Skandia&#39s protected portfolio investment is a capital-protected bond
that is linked to a portfolio of five externally managed funds from
Schroder, Fidelity, Invesco Perpetual, Morley Fund Management and
Merrill Lynch. It has two options &#45 one offers full capital protection and
up to 100 per cent growth while the other provides 80 per cent
protection and up to 200 per cent growth.

Hartley Greatbatch principal Keith Lewis prefers this product&#39s use of
a basket of funds to products that are linked to a stockmarket index.
He says: “Protected products such as this, which operate a basket
investment approach, are excellent products. This product&#39s two
options of 100 per cent and 80 per cent capital protection allow for
flexibility in the sales approach, taking account of risk factors for the
client types and how much to invest.”

Lewis believes the range of funds contained in the portfolio is
excellent and this makes it fit into the market well, as there is less
risk compared with direct investment in funds that reflect growth in
the market. He adds: “The star rating of these funds will impress
even the less interested client, as they are well known and respected
funds.” He adds that the use of preference shares to provide the
guarantee allows for more flexibility than some products which have
formal and complicated structures.

Lewis also has good things to say about the literature. He says: “The
literature gives a full and frank look at structured products, which is
useful since there are now many different types coming into the

However, he feels the main drawback is that product will be closed to
investors in mid-January. He explains: ” The limited time span,
especially over the Christmas period, does not allow for any large
marketing campaign. The product is unlikely to get the benefit of the
usually increased activity in the new year, while in December clients
are thinking about other things.”

Lewis also points out the use of averaging can backfire as it may
produce sub-standard returns compared to other products which
may have an extra level of security in the form of lock-in features. But
he concedes that he prefers quarterly reviews like Skandia&#39s to
products which use half-yearly averaging.

According to Lewis, the Sterling protected profits fund will provide the
main competition as it was launched at the very bottom of this
modest bull. He also suggests the Axa active selector fund, which he
says is popular due to its protected lock in guarantees.

Summing up, Lewis says: “The fact that this product can be used in
complete range of life and pension products will be very useful. The
term of five years is about right and the averaging over 20 quarterly
periods can be an advantage.”

Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good
Overall 7/10


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