The 'PruFund Cautious Fund' - The safer home for savers and investors
With UK interest rates set to remain at record lows for the foreseeable future many of our investors are still looking for products that offer a decent return without taking excessive risk. Returns on deposit accounts continue to be poor and doubt about the long term future of the markets has increased investor’s appetite for greater predictability on their returns. What many are looking for is a safer way to invest in world markets using a cautious approach that delivers growth over time.
It is perhaps unsurprising, therefore, that a growing number of investors are interested in With Profits Bonds as these offer smooth and steady returns. Last year, across Britain, an estimated 100,000 predominantly cautious investors invested £3.4 billion in with-profits bonds (Source: Guardian, Aug 2009). Prudential with-profits bond sales increased 48% with L&G and Aviva having also reported robust with-profits sales figures. Prudential says this strong sales growth reflects the attractiveness of its with-profits offering and in particular the £1.5bn PruFund (Source: IFAonline, Aug 2009).
Clients are understandably looking for the following important features:
i) A trusted and familiar brand with significant financial strength
ii) A simple product structure that they understand
iii) A strong track record of performance over a meaningful time period
iv) A proven method of smoothing the peaks and troughs of investment
More surprising is that this recent spike in sales of With Profits Bonds comes despite fresh attacks on an already damaged product category. The disappointing performance and onerous clauses of many With Profits Bonds have been well documented but could actually benefit investors. By creating scepticism investors should be moved to carry out more robust analysis of the With Profits Bonds they buy and this is something we encourage strongly; it should result in more investors finding the best providers and this appears to be what is happening.
The danger is that the bad publicity With Profits Bonds have received can lead to investors disregarding them altogether. With Profit Bonds are rightly viewed with caution by many investors but letting this scepticism distort investors’ judgement to the point that they miss good opportunities should be avoided.
In response to the latest round of criticism Maggie Craig, the Association of British Insurers director of consumer strategy, said: "it does not help consumers to paint a partial picture that could cause unnecessary concern.” (Source: Money Marketing, 8 Oct 2009. This is a view Chartwell agrees with. There are excellent With Profits Bonds available and cautious investors are clearly interested in them. Chartwell are therefore promoting Prudential’s Prufund Cautious Fund as an example of what is on offer from a product category that we don’t think should be overlooked. Prudential’s Prufund Cautious Fund, part of their new breed of more transparent With Profits Bonds, could match the needs of many cautious investors. It is essentially a cautious managed fund (the most popular sector in July and August 2009 according to the Investment Management Association (Source: IMA website) with the addition of a smoothing mechanism. The fund is not aiming at spectacular returns; it is aiming at predictable returns. As part of Prudential’s Flexible Investment Plan it also gives investors the flexibility to switch to other funds in their range with different asset allocation at no extra charge.
Chartwell are delighted to offer an exclusive 5% cash top-up on all investments up to 18th December 2009. Investors benefit from having an Expected Growth Rate, an automated smoothing formula that is easy to understand, no confusing bonus structure and no Market Value Reductions. We think this will be an enticing opportunity for many of our clients for the following reasons:
i) It is provided by Prudential, a trusted brand with significant financial strength
ii) It is a simple and transparent product
iii) It is part of Prudential’s tried, tested and successful approach to With Profits Bonds
iv) It has a unique and proven smoothing formula that increases predictability
For more information on this product please contact our Investment Helpdesk on 0117 9170777, or email direct@chartwell.co.uk