Skandia has created a new share class for its protected fund, Skandia Shield, to enable customers to invest in the product via an Isa.
Graham Bentley, head of proposition at Skandia, said it is likely the fund will have mass appeal as investors are looking for performance linked to stock market and bond investments but with some protection against losses: "The 80% downside protection will offer some peace of mind to investors, especially in such volatile markets, and the fact that clients can go in and out of the Fund when they like makes it more appealing than structured products which lock the money in for a fixed term," he said. "The avoidance of potential cash-lock should satisfy anyone who has an aversion to CPPI-type products."
The Shield Fund offers 80% protection on the highest ever share price achieved, so if the share price falls, there may be a situation where investors are buying something offering a protection of 95% or more of the original investment. To solve the problem Skandia has been working with Commerzbank, the fund manager, to create a new share class specifically for Isa customers. The share class will be closely monitored to ensure it does not breach HMRC regulations. If the 95% protection level is breached at any time the fund will close temporarily to new investments until the level of protection goes back below the 95% level.
Skandia said this enables the fund to comply with HMRC regulations without the need to restrict the level of protection or introduce lock-in periods. During July 2011 the share price peaked at 106p, giving a protected price of 85p which remains despite recent falls in the share price.
Skandia Shield was launched in November 2010 at 100p with a protected price of 80p. The fund is UCITS-compliant and offers daily liquidity with no lock-in period; it also includes a volatility-based cash and asset allocation strategy as opposed to a returns-base approach to prevent the fund from cashing out.
Bentley said Skandia Shield is now attracting nearly £8m in sales a month.