19 March 2012
Royal Skandia, part of Skandia International, the offshore business of Old Mutual plc, today announces the launch of the Royal Skandia GBP Shield fund – an innovative risk targeted fund offering downside protection. The fund invests directly into the Skandia Shield fund and is available to retail investors through Royal Skandia’s offshore Portfolio Bond range.
Royal Skandia has launched the fund in response to demand from investors. Research* shows that 55% of international financial advisers say their customers have become more risk averse over the past few months and 80% of advisers say they are now more likely to recommend protected products as a result of recent market volatility. For 8 out of 10 investors the most important feature of a protected product is capital protection according to these financial advisers.
The Royal Skandia GBP Shield Fund is a daily priced and traded fund with no minimum or maximum investment period. It is managed to a target volatility of 8% and offers downside protection of 80% of the highest ever share price achieved by the fund. Although protected, the price is not guaranteed and, as with all investments, protected funds still carry a risk to capital.
Unlike traditional structured funds, the performance of the underlying portfolio is based on total returns so that investors benefit from dividend returns as well as share price gains. A separate derivative is used to provide the downside protection, rather than cash. This means that the Fund always retains its exposure to the underlying portfolio, thus potentially benefiting when an upturn occurs.
The fund is expected to appeal to investors who are looking for investment performance linked to global equity and bond markets, but who also wish to limit the risk to their capital.
The underlying fund, which has been developed in conjunction with Commerzbank AG, London Branch has, until now, been exclusively available via the Skandia Investment Solutions platform in the UK.
The recent falls in global stock markets have highlighted the value and peace of mind that can be delivered by protected funds. The maximum loss suffered by the MSCI World Index during the past twelve months reached a significant -19.3% - a painful experience for those invested in global equity funds**.
Over the same period, following an increase in the bid price to £1.06, the protected price for the underlying Skandia Shield fund is now fixed at £0.85p – the minimum investors in the underlying fund could expect to receive from now on. This translates into a downside protection level equivalent to 82% based on the latest fund price (£1.04 as at 16/03/2012), meaning that investors can already benefit from more favourable protection levels than those defined in the fund objective.
Dean Bowden, Chief Investment Officer for Skandia International comments:
‘For those investors who can’t afford, or simply don’t want, to take the chance and potentially experience even deeper price falls than we have seen recently, protected funds can provide the optimal solution. The Royal Skandia GBP Shield Fund is offering a high degree of capital protection together with the potential to benefit from rising stock market prices in future. And because the fund is daily traded, investors can dip in and out as frequently as they wish, whilst taking full advantage of all the benefits that this unique fund has to offer.
* The Offshore Adviser Confidence Barometer research was conducted by Skandia International in Q4 2011 and attracted responses from over 450 advisers from around the world – Hong Kong, Singapore, Dubai, UK, Europe, Africa and Latin America.
** maximum drawdown calculated over 16/03/2011 to 16/03/2012, MSCI World Index Gross Total Return in GBP, Source: Financial Express Analytics.
This press release is for journalists only and should not be relied upon by financial advisers or customers.