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With-profits hold up well despite the bad publicity

The performance of with-profits bonds has held up well despite bad publicity and tumbling stockmarkets, says IFA Chartwell Investment.

The company says that while the products are not likely to outperform the average equity fund or achieve spectacular returns, when looking at the numbers, they have not fared badly.

Chartwell has compared the performance results of the major unit trust sectors against the returns of with-profits bonds.

It found the average annual return of a with-profits bond has been 9.9 per cent a year or 60 per cent over the last five years, which is above the performance of some unit trust sectors such as global growth, active managed, emerging markets, Japan and the Far East.

Sectors which rank better than with-profits are Europe, returning 100.5 per cent over five years or 14.9 per cent a year, followed by the US at 98 and 14.6 per cent, UK smaller companies at 89.1 and 13.6 per cent, UK all companies at 69.3 and 11.1 per cent growth, UK equity income at 67.9 and 10.9 per cent and specialist at 67.7 and 10.9 per cent.

Chartwell associate director Patrick Connolly says: “With-profits bonds have received quite a bit of negative coverage as of late, a lot of it for good reason. But investors are still very keen on the product and this is due to the fact that they are a safe investment and their performance has not been that bad.”

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