Called Secure Distribution it blends unit trust features of daily dealing and transparent pricing alongside those of structured products to give an investment proposition with a 20-year term, evenly split with ten years accumulation followed by a further ten years drawdown.
The capital payment made during the second half of the plan will be 7.5% of the highest net asset value attained during the first ten years.
James Rainbow, head of UK marketing at Schroders, confirmed the payments will be made quarterly and was keen to emphasise they will be made as capital drawdown as opposed to income thereby taking advantage of largely preferential capital gains tax rates.
At the end of the 20-year term, any excess capital will be returned as a lump sum payment. Because it is not a capital protection plan, there is the possibility for zero return on maturity. The worst-case scenario is for no growth in the first ten years. In this instance, the payment during the decumulation phase will be 7.5% of the original capital.
“This is not a plain vanilla balanced fund,” Rainbow explained, “of stocks and bonds; nor is it a new balanced with a full range including hedge funds, property, private equity etc.
“It will go as far as the liquidity profile allows so will not invest in hedge funds, property, private equity etc. To secure the distribution levels, it will need to flex the assets to allow investment in cash and cash-like assets.”
Secure Distribution is not a fund of funds though during its first ten years it will invest in a multi-asset portfolio under the auspices of Johanna Kyrklund, head of multi-asset investments. The portfolio manager will be John McLaughlin, head of portfolio solutions.
The fund will be launched in July though it will not be more actively marketed until September.
