Royal London’s new Riley investment bond product is designed to give investors the option of investing in a passively managed FTSE 350 tracker or picking an actively managed 350 fund while building in the flexiblity for the investor to pick or choose their respective level of exposure to both.
While the name of the new product could be seen as a license for subs everywhere to have a little fun – as some already have – the group may not have been expecting quite the level of flak over its charging structure.
The initial charge of 6.75 per cent is viewed in some quarters as prohibitive.
While the ten year product has already received plaudits for being flexible and transparent there is a suspicion in some quarters that the biggest beneficiaries will be Goldman Sachs, who will provide the protection.
Having done the maths from examples provided by Royal London, Bestinvest’s Justin Modray estimates that if the client wants 100 per cent capital protection over the full ten year term, it would cost around 15 per cent.
If Modray’s assertion that the true opportunity cost could be up to a quarter of the initial investment when the cost of lost potential growth of the protected money is factored in, Royal London may struggle to market the product as investors seek cheaper alternatives.
Schroders on the other hand are happy to endorse the product, especially as the group’s Andy Simpson has been chosen to run the actively managed chunk.
Time will tell whether investors will be swayed by the investment bond as opposed to alternative opportunities but Royal London should be given some credit for coming up with something a little different.
First State will probably be upset at the departure of their global opportunities fund manager Andrew Dalrymple who has gone with the recent investment trend of setting up his own boutique.
Anyone who has returned 76 per cent against a three year sector averge of 44 per cent is always going to be hard to replace and global growth manager Habib Subjally has big boots to fill.
Dalrymple’s next move looks quite intriguing but as yet there is scant detail on his new boutique beyond the fact that it may involve a number of long/short hedge products. One insider believes it may contain a large amount of European product and rather less from emerging markets but all will be revealed soon.