The Guaranteed Section
Here’s what Aviva’s Richard Kelsall, Head of Investment Marketing, has to say about the funds:
The banking and global economic crisis of recent years has left many investors with shaken confidence. The question many investors may be asking of their advisers, then, is: “How do I protect my money but at the same time get any sort of meaningful return?”
Aviva hopes its new range of guaranteed funds (available via Portfolio from June 2011) will provide the answer advisers and their clients are searching for.
The new ‘Aviva Guaranteed Selection’ is a range of three investment funds – named Guaranteed 80, Guaranteed 90 and Guaranteed 100 – that come with a built-in guarantee on the fifth anniversary. At other times, the value will fluctuate but the guarantee acts as a safety net so if the fund doesn’t perform well, your client will still be able to get a certain percentage of their original investment back on the fifth anniversary. Any withdrawals will reduce the guarantee in proportion to the number of units cancelled, not the cash amount withdrawn.
Funds
The funds within the Guaranteed Selection provide differing levels of growth potential and guarantees on the initial investment. The diagram below illustrates the differences between the three funds.
Using the initial investment as the baseline, each diagram shows the guaranteed level of return on the fifth anniversary in the form of a broken line. The projected levels of both positive and negative potential returns are shown above and below the baseline. When you compare all three diagrams you can clearly see that the range of returns is greater for Guaranteed 80 than Guaranteed 100. You will also notice that the guarantee offered by the Guaranteed 80 is lower than that of the Guaranteed 100. This clearly illustrates the balance between risk and reward for each fund, which is the key principle behind the Guaranteed Selection. Both higher returns and higher losses are possible for investors in the Guaranteed 80 Fund compared to investors in the Guaranteed 90 or 100 Funds.
Switching
An attractive feature of the funds is that investors can switch between the funds, charge-free, whenever they want (provided they do it online through you, their adviser). This opens up two interesting possibilities for clients: first, the ability to ‘lock-in’ any growth they’ve made, and second, the ability to improve growth potential whilst maintaining a guarantee of a certain amount of their original investment.
Because investors can switch between the funds so freely, they can ‘lock-in’ any growth they’ve made. So, say a client’s investment in the Guaranteed 90 Fund has been performing particularly well. They can choose to switch in to the Guaranteed 100 Fund in order to effectively lock-in any growth, safe in the knowledge that they’ll be able to collect at least this amount in five years’ time.
Similarly, if a client invests, for example, £10,000 in the Guaranteed 100 Fund and sees their investment grow by £1,500, they could switch into the Guaranteed 90 Fund. By doing this, they’ll still be guaranteed to receive at least their original investment five years on from the switch (90% of £11,500 being more than £10,000) but invested in a fund with a higher growth potential.
Switching gives investors greater control and flexibility. Of course, it’s important to remember that investments can go down as well as up and investors may not get back what they invested unless they invested in a fund with 100% guarantee. The guarantee level is only available at the fifth anniversary of the switching date
Key benefits
The benefits of the Guaranteed Selection:The funds within the Guaranteed Selection offer differing levels of growth potential and guarantees on the initial investment.
They all offer :
- A guaranteed payment on the fifth anniversary – of either 80%, 90% or 100% of the original payment
- Growth potential by investing differing proportions of each fund in equities or property
- A significantly lower level of risk than 100% investment directly in equities
- The potential for better returns than standard deposit and savings accounts
- Expert investment management by experienced Aviva fund managers
You may also want to consider :
- The guarantee only applies on the fifth anniversary. At all other times during the five year period, the value of the investment can go down as well as up and investors may not get back the amount they invested if they withdraw their money
- There are charges for managing the investment, and an additional charge is made to help provide the guaranteed element of the Guaranteed Selection.
- The guaranteed element of each fund may result in lower growth potential than is offered by a direct investment in some asset types such as equities
- Deposit savings accounts offer less risk of losing money, and with many accounts customers can access their money at any time
- At the fifth anniversary, only 80% or 90% of the original investment is guaranteed in the Guaranteed 80 and Guaranteed 90 funds, which means the investor may get back less than they paid in.
Library
Click on the links below to access supporting literature for the Guaranteed Selection
