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With-profits alternative

FundsNetwork’s research was spot-on in highlighting how IFAs are turning away from with-profits (Money Marketing, February 8).

There is an alternative that offers their clients the investment features that always made with-profits so attractive in their heyday, namely, steady, predictable returns. The alternative is funds that invest in traded life policies.

TLPs are US-issued life insurance policies sold before the maturity date to allow the original owner to enjoy some of the benefits during their lifetime. Their great attraction is that they offer steady, predictable returns, provided the investment manager has the right actuarial expertise to buy them at the right price.

Diversification is also key but, with the right approach, it is possible to calculate to a high degree of accuracy the returns that can be made from a portfolio of these policies.

Because of the high degree of certainty attached to TLP returns and their solid value, it is possible to secure a substantial degree of gearing to enhance returns and initial allocation rates. This is particularly attractive to UK investors who suffer a hefty surrender penalty when they pull out of with-profits funds.

Another attraction is the low charges. TLP funds often have no initial charge and annual management fees as low as 0.3 per cent.

The TLP market may be relatively unknown in the UK but it is a burgeoning market in the US, where it has grown from $50m in 1990 to a staggering $10bn in 2006.

UK investors are set to hear a lot more about TLP products in the near future.

Jeremy Leach

Managing director, Managing Partners, London EC3

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