With-profit funds have had a rough ride since the turn of the century, and their demise has been well documented. But the market environment has changed. Christopher Salih asks if 2006 will see with-profits attracting investors once more, or will the flaws exposed over the past few years prove to be fatal?
The story of with-profits has been well told. The principal was fine, but the reality lacked transparency, performed badly and ended up ill-serving investors. Regulators intervened after the event and - some would argue - have made the situation worse by forcing insurance companies to buy corporate bonds for asset-liability matching at a time when they were fully valued. Throw market value adjustors (MVAs) into the mix and it is understandable why the tale of with-profits is such a sorry one. The souring of the market in 2000 started a chain reaction for with-profits. Poor returns led to ...
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