Tue, 26/02/2008 - 13:07
Blue Sky Asset Management, the UK innovative investment boutique, has launched its first growth structured fund, which enables investors to select their own asset allocation. It offers a 100 per cent contingent capital protection at maturity, with the fund needing to be held for six-years.
The Asset Allocation Accelerated Growth fund, which is available through retail intermediaries and to institutions, has been designed to deliver out-performance potential in one of four major market selected by investors - the US, UK, Europe or Japan - plus a high degree of capital protection.
A key selling point of this product is that it gives investors the chance to secure enhanced returns on a range of the world's leading stock markets while never under performing any of the underlying indices and enjoying some contingent capital protection.
The fund is a sophisticated version of a structured fund. Blue Sky believes the fund, which follows on from its Protected Income plan, is a major challenge to the rationale for investing in passive tracker or actively managed mutual funds. The fund is open until April 11th allowing investors to use Isa allowances from two tax years.
The plan delivers performance in two stages. In the first stage, investor returns are expected to be 10-times the growth of the UK's FTSE 100, the US's S&P 500, Europe's Dow Jones EuroSTOXX 50 or Japan's TOPIX indices, up to a maximum first tier return of 60 per cent.
In the second stage, the plan adds unlimited geared returns on the underlying indices above 60 per cent, according to the following percentages: 125 per cent of the S&P 500; 150 per cent of the FTSE 100; 225 per cent of the EuroSTOXX 50 and 250 per cent of the TOPIX. By definition the plan cannot under-perform any selected market index.
The plan also includes 100 per cent capital protection at maturity, based upon a 50 per cent Downside Portfolio Barrier Level applying to any market selected.
The Barrier Level offers investors capital security provided the underlying market does not fall more than 50 per cent. If it does drop more than 50 per cent, and fails to recover by maturity, losses are one per cent in line with the selected market index.
The Barrier Levels are only triggered by closing prices and the plan also includes six months final averaging which spreads the measurement of the final value of the indices prior to maturity. Each market is selected and accessed independently within the plan, meaning that any potential loss within one market is constrained to just that market and does not impact on any other.
Chief executive at Blue Sky Asset Management, Chris Taylor, says: ''Economic growth is slowing in most major economies, with obvious implications for stock market returns over the next few years.
'The AAA Growth plan facilitates investor choice and control in asset allocating to any major stock market, with the opportunity to reduce market risk whilst enhancing future growth potential. Our view is that a balanced return to more stable and positive growth can be anticipated and planned for.
'We believe the plan dramatically turns the tables in favour of the investor. It offers reduced risk through contingent capital protection. There is no potential to under-perform selected indices - a key risk of active fund management.
'There is the potential for high absolute returns from even moderate market growth. Out-performance potential is unlimited if market growth is strong. It constitutes a major challenge to actively-managed or passive tracker funds and is an exceptionally timely proposition for all investors to consider.'
If the selected underlying market index falls more than 50 per cent then worst scenario losses in the plan are identical to a tracker; if the market delivers exactly zero or 60 per cent then returns will be exactly zero or 60 per cent in all other scenarios, the plan will deliver potentially significant market out-performance to investors.
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