the bond will be 50% invested in a fund of hedge funds and the rest in bonds and equities
Isle of Man-based BoE Life International (BoELI) has launched a with profits bond, half invested in hedge funds, to be distributed through Royal Skandia, Canada Life International and directly to UK-based advisers.
The company will run a series of seminars to promote the product, starting in Edinburgh on 19 November and ending on 27 November in Gatwick.
The single premium sterling-denominated bond will invest in the BoELI Series 4 With-Profits Fund, which invests 50% in funds of hedge funds and 50% in equities, bonds and cash. It is currently invested about 30% in equities and 20% in bonds.
The product offers a choice of charging structures and a range of features to assist financial planning, including an establishment fee option and an initial fee option.
The establishment fee option allows clients to spread the cost of the investment over a number of years.
For the growing number of advisers who are moving to fee-based remuneration structures, the initial fee option provides a simpler charging structure without surrender penalties.
The product also provides flexible financial planning opportunities. There is a choice of contract type on the product between capital redemption and life assurance.
The capital redemption version is useful for trusts and tax planning as the necessity for appointing lives assured is dispensed, according to Adrian Corkill, who is responsible for technical and product development.
'The great strength of capital redemption policies is that death does not trigger a chargeable event ' policies can only end either at the maturity date or if deliberately surrendered by the policyholder,' he said. 'Therefore, the tax practitioner can advise their client exactly when a gain should be crystallised.'
UK advisers will have the opportunity to attend a series of seminars through November on the firm's investment philosophy and the new product.
The company is also developing relationships with other institutions keen to offer their own clients access to the fund. The new bond benefits from the level of bonus rate currently being paid in the With-Profits Fund. From 1 October BoELI began applying an interim bonus rate of 5% to its Series 4 With-Profits Fund.
Many other providers of onshore and offshore with profits funds have made significant cuts on rates that are already lower than BoELI's, or have announced their withdrawal from the market altogether, according to Corkill.
BoELI's investment philosophy is centred on the use of funds of hedge funds in its With-Profits Fund.
Since November 1999, the date from which BoELI has been using alternative investments, the investment growth of the assets in its With Profits Fund has risen about 8% (to end June 2002), said Corkill.
Over the same period, the asset value of a 'typical' with-profits fund (as measured by a BoELI asset allocation/market index model) has fallen by about 15%.
In July 2002, Nedcor acquired BoE. As subsidiaries of BoE, the BoE International group of companies, including BoELI, have now become part of the expanded Nedcor group.
The newly merged group is now the largest banking group in South Africa, with the majority shareholder being Old Mutual.
Putting the tech into protection
Square Mile’s series of informal interviews
Fallout from Haywood suspension
Launching later in 2019
£80bn funds under calculation