Tilney Investment Management has introduced a second issue of the Opal tailored notes plan, a capital-protected fund which is linked to the performance of a hedge fund of funds or a combination of this and a conventional fund of funds.
The product offers a choice of two investment options which each have a term of six years and six months. The diversified growth option provides a full capital return plus100 per cent of any growth in the Opal optimum diversified tailored notes fund. This is a feeder fund which will invests 50 per cent in the Opal optimum master hedge fund of funds and 50 per cent in the Opal UK premier manager fund of funds.
The optimum growth option also provides a full capital return plus 100 per cent growth but it is linked only to the Opal optimum master fund through the Opal optimum tailored notes feeder fund.
Initially the feeder funds will be exposed to 100 per cent of the growth in the funds but the level of this exposure can vary within a range of 80 to 150 per cent. Each month the performance of the underlying funds is assessed, then the exposure will be maximised to enhance returns where performance is good or minimised to protect the capital from poor performance.
This approach is a hybrid of products that offer a defined participation rate and products which use constant proportion portfolio insurance. Many products which use CPPI tend to have no limits placed on the exposure to the underlying funds, whereas the Tilney Opal product offers variable exposure within a defined range.
Investors who want a broad portfolio with capital protection may find the diversified growth option appealing. Those already hold a range of conventional funds may find the optimum growth version useful as a means of diversification, especially if they like the comfort factor of a guarantee. Some advisers may feel there is little need for a guarantee on hedge funds because of the way they work, but the optimum growth option’s potential for geared exposure may be attractive for investors who are not too bothered about capital protection.