Old Mutual Asset Managers (Omam) is targeting with-profits investors with a fund of hedge funds with...
Old Mutual Asset Managers (Omam) is targeting with-profits investors with a fund of hedge funds with a total expense ratio (TER) hovering around the 4.5% to 5% mark.
The Prosper 80 Bond gives access to the Old Mutual Prosper Protected Fund. This open ended portfolio looks to provide cash plus 4% a year returns after fees by investing in a range of eight hedge fund strategies. Barclays bank has provided a guarantee, in the form of a medium term note, that the lowest pay out on the product is 80% of the underlying fund's highest ever price. The product has an open ended structure.
The minimum investment is $10,000 or euro equivalent. Omam's annual management fee is 1.5% and protection charge is 0.9% for each investor. The basic charge for the underlying strategies is around 1.25% with a 20% performance fee on all gains. Assuming the underlying strategies produced 8%pa returns this would be a further 1.6%pa. In total this would create a TER of 5.25%
This product was initially seeded by Omam with more than $40m in April 2005 and with additional client investments Old Mutual Prosper 80 total assets now amount to $80m under management. Since launch in April the dollar version has been up to 3.2% for the first five months, which is equivalent to an annualised return of 7.5%.
Initial commission for intermediaries is up to 3% which is deducted from the initial investment. There is also a renewal commission of 0.5% which comes out of the 1.5% management fee.
Simon Wilson, head of marketing at Omam said the product would be ideal for long-term investors who want a low risk investment. The group is marketing it in Europe, the Middle East and Asia.
charging levels on product
Omam's annual fee: 1.5%
Protection fee: 0.9%
Average charge on underlying strategies: 1.25%
Assume underlying performance fee of 20% of real gains. If 8% return this equals 1.6%pa
‘Important to have an anchor’
Report to be written by TPR
Lack of innovation for solutions
Some 2,000 consumers affected