the group is to cease promoting actively managed cat-standard funds to investors
Norwich Union is to launch a property Isa and raise the charges on a number of portfolios as it looks to withdraw from actively managed Cat funds.
Under current regulations, investors cannot hold property unit trusts within an Isa. However, the structure of the Norwich Union product is a specially set up company listed on the Dublin stock exchange, the shares of which are eligible for Isa investment. This company will hold units in the Norwich Property Trust, thereby giving investors exposure to the commercial property market within the Isa.
The Norwich Property Trust invests in direct holdings of UK commercial property ' around 70% of the fund ' as well as other property assets such as shares of property companies.
Estimated yield on the fund is 4.3% per year. It features initial and annual management charges of 5% and 1.25% respectively, with 3% intermediary commission available. Investment opens on 3 February and closes on 18 March. Income and growth options will be available.
David Hewison, product manager, investments, at Norwich Union, said the property Isa will allow investors to diversify from the traditional equity and fixed interest markets.
Commercial property has a strong track record, Hewison added, and has outperformed the FTSE All-Share over one, three, five and 10 years.
'As returns from commercial property are underpinned by rental income, typically on upwards-only leases, we are forecasting total returns in the overall commercial property market to be about 9% per year for the next three years,' he said.
At the same time as the group is introducing the property Isa, it is moving away from actively managed Cat-standard funds and instead offering its present range as conventional funds.
The company said it is uneconomical to continue offering actively managed Cat funds and is increasing charges to reflect the true cost of selling and managing them.
Eight funds are affected: Higher Income Plus, Corporate Bond, Portfolio, European Equity, UK Equity, UK Equity Income, UK Ethical and UK Growth. Three passive portfolios will remain as Cat funds: the group's Blue Chip, UK Index and International Index trackers.
The affected funds currently attract no initial charge and have an annual management fee of 1%, with the exception of the Corporate Bond fund, which has an annual charge of 0.8%. Existing investors, including regular savers, will continue to be charged at those levels.
From 28 February 2003, new investors in these funds will be put into a new share class which will pay a 4% initial charge on the Higher Income Plus and Corporate bond funds and 5% on the rest of the range. Annual management charges will rise to 1.5% for all but the Corporate Bond fund, at 1%, and Higher Income Plus, at 1.25%.
Commission levels have also been changed, with the new share classes attracting 3% commission, up from 1.5%, and trail commission of 0.5%, up from 0.15%. The three tracker funds will have their commission levels reduced from 1.5% to 0.4%.
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