Skandia has launched the industry’s first platform based risk-targeted protected fund.
The Skandia Shield Fund will offer downside protection of 80 per cent of the highest ever share price of the fund.
The performance of the fund is derived from a portfolio made up of a basket of 16 different UK and international asset classes and a cash holding. The asset allocation of the investments held in the basket will be controlled to remain within a volatility target of eight per cent, equivalent to a risk rating of four out of ten on Skandia’s risk scale (ten being highest risk).
The fund relies on a separate derivative to provide the downside protection, rather than cash. This means that the fund always retains its exposure to the underlying portfolio, thus benefiting when an upturn occurs.
The fund will also be the first protected fund on a platform to have a low unbundled total expense ratio of 0.90 per cent and no initial charge.
Unlike traditional structured funds, the performance of the underlying portfolio will be based on total returns so that investors benefit from dividend returns as well as share price gains.
The Skandia Shield fund has been developed in conjunction with and is managed by Commerzbank, London branch. It is available exclusively via the Skandia Investment Solutions platform.
The launch share price will be GBP1 so once the share price reaches GBP1.25 there will be 100 per cent protection of the initial GBP1 share price.
The fund can be held via the pension, onshore bond, offshore bond and unwrapped collective investment account on the Skandia Investment Solutions platform. The fund is daily priced and traded and has no minimum or maximum investment period.
Graham Bentley, head of proposition at Skandia, says: “Recent stock market volatility has rocked investor confidence and we believe there is demand for a protected product which avoids the pitfalls and inflexibility of many structured funds currently available. This new fund is daily traded with daily protection so investors are not locked in for a set term and it has a clear volatility target and risk level so people can understand whether it is aligned with their own attitude to risk. It is very competitive on cost and investment returns will be linked to total returns of the underlying portfolio, including dividends, which is uncommon in the structured products market.”
