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Swip opening the door to European corporate bonds

Norwich Union has published the principles and practices of financial management for its with-profits funds which all life offices must publish under the FSA&#39s new realistic reporting regime.

The firm has also introduced a 0.75 per cent charge to pay for guarantees on its NU life & pensions with-profits fund to allow it to maintain a 52 per cent equity backing ratio.

Designed to increase the transparency of with-profits, PPFMs are complex documents which set out the amounts payable under a with-profits policy, the investment strategy, management of the inherited estate and calculation of asset share.

NU says it is imposing a charge on the NUL&P fund – revealed in Money Marketing last week – because it says it is the only way that it can avoid increasing the fixed-income element in the fund under the new realistic reporting regime.

The CGNU with-profits fund, which takes the majority of new business, and CULAC with-profits fund have an equity backing ratio of 65 per cent but no guarantee charge is being imposed.

NU&#39s Provident Mutual fund, with an equity backing ratio of only 24 per cent, will not see a guarantee charge but projection rates will be reduced to reflect the lower anticipated overall returns, with the middle rate reduced by 1.5 per cent.

NU chief actuary Mike Urmston says: “The introduction of PPFMs demonstrates greater transparency in with-profits reporting and we now have a complete picture linking together realistic reporting, investment policies and bonus declarations.”

Informed Choice managing director Nick Bamford says: “When is a guarantee not a guarantee? When the product was sold on the basis of the guarantee, I bet nobody pointed out that a charge could be brought in to pay for it.”

Scottish Widows Investment Partnership has launched a European corporate bond fund with a minimum investment of £25,000.

Swip, which has around £46bn under management in the fixed-interest and treasury markets, says the fund will aim at top-end discretionary investment managers, private-client stockbrokers, private banks and institutional investors.

The fund will invest predominantly in euro credit investment-grade securities. Swip claims it is one of only a few offering access to the European corporate bond market.

It will be managed by global bonds team investment director Gareth Quantrille. He runs a number of corporate bond portfolios and is experienced in researching global corporate bond markets.

The fund will be a sub-fund of the Swip Oeic. It can be used as part of fund-of-fund managers&#39 portfolios and discretionary managers&#39 own Isa wrappers.

Wholesale business head Steve Hutton says: “The European corporate bond fund will increase the flexibility of our existing fund range, maximising our bond fund capability.

“The fund is one of a limited number existing in the market. It provides an excellent platform to further develop our wholesale client base.”

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