Life office analyst Ned Cazalet is acting as adviser to an offshore fund of with-profits funds being launched by investment boutique Circus Capital.
The aim of the Diversified Smooth Growth fund is to focus on financially strong life offices. Money will initially be split evenly between Norwich Union and Prudential.
While the product will be priced on a monthly basis, investors will not be allowed to take their money out in the first year of investment and will be subject to penalties in the subsequent four years. Policyholders will also be subject to market value reductions if the underlying investments fall significantly. The vehicle, which buys units in with-profits funds, is the policyholder rather than investors in Diversified Smooth Growth.
Circus Capital, set up in 1999 and which has London and Hong Kong offices, specialises in protected and military technology funds.
Cazalet stressed the importance of stock selection when buying with-profits. He said: 'In the past, some might have regarded one life company as being much the same as another in terms of financial strength, now it is important for intermediaries and investors to take care when choosing a with-profits provider.'
Director of Circus Capital Paul Robinson pointed to the dangers of being exposed to a single with-profits fund. He said: 'Anyone recommending a with-profits fund recently may be slightly nervous that they have picked one from a financially unsound company. Using a fund of with-profits funds allows advisers to show that they have exercised due diligence.'
The fund, available in euros and dollars, is based in the Cayman Islands and is available under two charging structures. There will be a 1.25% annual fee on the fund under both charging structures, 0.25% of which will be trail commission for intermediaries.
For investors with $50,000 or more, an institutional charging structure is available. There is no initial charge but intermediaries will receive 0.25% trail commission. Under the retail charging structure for those with $10,000 or more the fund will pay 4% initial commission to advisers.
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