Foundations Capital has launched a product that allows investors to use existing investments as coll...
Foundations Capital has launched a product that allows investors to use existing investments as collateral on a loan, which is then invested in a bespoke portfolio run by Baring Asset Management.
The programme will allow investors who are already fully invested to buy into the product, which is an absolute return investment vehicle that can be tweaked to suit investors' tastes.
The aim of the Foundation programme, an Isle of Man Experienced Investor fund, is to give investors additional returns on their overall investments of between 4% and 6% a year over a five-year period without having to produce new capital.
The geared money is invested in private client managed portfolios tailored to a risk profile set by Foundations. The minimum target of these portfolios, of which Baring Asset Management (BAM) is the first of several managers that will be chosen to deliver a return higher than the loan interest rates – essential if clients are to make a profit.
"No additional investment is required as an existing asset is assigned to the programme," said Foundation CEO Lee Barkman. "Although assigned, the client can continue to manage the original portfolio according to their chosen strategy and can switch asset classes when required. The return to the client from this original portfolio is independent of the programme."
Barkman said the programme involves borrowing to try to achieve the extra return. But he argued that it differs from previous gearing products, notably those that have involved with-profits policies. The fund gears by using assigned policies and investments as security and then reinvests this loan.
He added that the geared assets are managed with a 'conservative level of growth in mind and with an associated, controlled level of risk' by private client advisers.
"This management targets a return above current interest rates," he said. "As there is separate management of the geared investments, Barkman argued that this provides necessary diversification.
"The emphasis is on risk reduction, so the investor's exposure to the programme is reset each month based on the changing value and perceived risk of their assigned portfolio," he added.
"BAM's absolute return approach and their range of expertise are the main reason for its inclusion. The classification of its strategies into distinct models based on risk and return expectation also matches the programme's approach.
The gearing is drip-fed rather fully invested from day one, said Barkman. "It takes 26 months before the investor is fully geared. This protects against the short, sharp shocks associated with negative movements in investment values and returns.
Investors need a minimum of $65,000 of existing assets.
£1bn business since inception
Considered doing so in 2015
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