Standard Life considered launching a pure money market fund days after its Pensions Sterling vehicle began dropping in value, but opted against it.
In email correspondence between the life insurer and adviser Graeme Mitchell on 9 October, a senior product analyst says: "I will put forward this matter for consideration".
Mitchell, managing director at Lowland Financial, had asked Standard Life why there wasn't a safer money market option available after the Sterling fund's value began to dip in late September.
The vehicle would go on to lose 4.8% as a result of its exposure to "toxic" mortgage-backed securities, even though 97,000 investors, who have since been told they will be fully compensated, were told their money was held primarily in less risky cash deposits. Most of the loss occurred in a single day.
"In all but the circumstances that have occurred recently, this fund has outperformed the money market," Mitchell was told.
"However I appreciate this does not give customers the guarantee that they will rightly be looking for in the current market. As a result I will put forward this matter for consideration.
"Please note this is not a promise nor guarantee that we will add a pure money market fund in the future."
Standard Life's Managed Cash fund was launched on 10 September but was open only to institutional investors. It wasn't made available to retail investors until 14 January, after the group revalued the Sterling fund.
A spokesperson for Standard Life says there was "no call" to make the Managed vehicle available to retail investors prior to that date.
Mitchell says he realised there was a problem with the Sterling fund in October and telephoned Standard Life to discuss alternatives. He says he was told the decline was due to its exposure to Lehman Brothers and that there were no fund alternatives.
"I faced a Hobson's choice - leave my clients' money in a fund that might fall even more or transfer to another pension that would have a set up cost," he says.
Adviser Chris Geeson, managing director at Geeson Financial Services, says the insurer should have made the Managed Cash fund available immediately.
"There was definitely a call to make it available to retail investors," he says. "But if it had, investors would have asked what the difference was between the two funds and Standard Life would have had to spill the beans on the investment content."
Standard Life says that, before 14 January, the Sterling vehicle was the least volatile fund on offer to retail investors.
"As a provider we need to be clear there is sufficient demand before, as in this case, opening a fund to retail investors," it says. "Hence we will always keep our fund range under review to ensure it meets the demands of customers."IFAonline
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