Aim: Growth and income by investing in bonds, money market securities, equities and derivatives
Minimum investment: Lump sum £1,000
Investment split: 100% in bonds, money market securities, equities and derivatives
Isa link: Yes
Pep transfers: Yes
Charges: Initial 5%, annual 1.5%
Commission: Initial 3%, renewal 0.5%
Tel: 020 7203 3329
Scottish Widows Investment Partnership has established a range of three absolute return funds, including the absolute return macro fund. This aims for growth by investing in bonds, money market securities, equities and derivatives.
Highclere Financial Services partner Alan Lakey says: “Once an idea becomes popular, everybody and their cat has to have one – and so it is with absolute return funds.”
Lakey notes that the concept is aimed at investors looking to balance their portfolios with an unconstrained investment approach. He regards the charges – 5 per cent initial and 1.5 per cent annual – as typical and the benchmark – Libor plus 3 per cent – as reasonable.
“The strategy revolves around the use of various derivatives to provide positive returns regardless of market conditions. While the concept is valid, this type of fund relies very heavily on the skills of the fund manager,” says Lakey.
In Lakey’s view, Swip has a less than appealing long-term investment record, particularly in the global sector. “While the recent out-performance has been better, the jury is still out. When I started in this industry, Scottish Widows was a vastly respected life company which sadly has lost both lustre and direction since its purchase by Lloyds TSB,” says Lakey.
He points out that New Star has launched a similar fund and unlike Swip, it can point to superior histories returns. “Merrill Lynch also offers a similar UK fund which has proved worthwhile since launch.”
Lakey concludes: “If the marketing men and bancassurer staff get behind the product it may prove a winner. I fear that independent advisers, with a wealth of choice, may find other funds more attractive.”
Suitability to market: Average
Investment strategy; Average
Adviser remuneration: Average