Schroders offers fund for troubled times

Schroder Investment Management introduced the fourth stage of a series of guaranteed fund offerings to Hong Kong investors earlier this week.

"Guaranteed funds have a genuine part to play in investment management," says James Campion, director and regional head of mutual funds. "We are trying to find a solution for savers concerned about falling interest rates. There are regular market cycles in the United Kingdom – there have been many recessions – and we have developed a sense for what investors are thinking."

Campion adds given the chaos following the terrorist attacks in America the day after the fund was launched, Schroders is allowing people who bought it to unsubscribe without penalty in the next few days.

Global interest rates, already low, may certainly fall further as the United States Federal Reserve Bank contemplates shoring confidence in the American economy and dollar. Low rates have already allowed fund houses in Hong Kong to raise record sizes of assets in guaranteed products this year.

Campion notes, however, that Schroders had capped its previously three guaranteed offerings. "We have been trying to get a sense of what demand is like," he says. The first $123 million fund's underlying assets comprised European equities and emerging-market debt, while the subsequent two (one $151 million, the other $300 million) looked at global technology stocks.

This latest offering, which aims to raise another $300 million, provides exposure to global equities, with 40% in the United States and 30% each in Europe and Asia. It will be managed by Schroders' structured investment team in London.

The average participation rate of the first three funds is 35%. About 90% of the assets are invested in bonds, the remainder in options designed to enhance the value of the underlying security. The participation rate for the fourth fund will be known after subscriptions close on 12 October. There is no redemption or front-end load; management fees have not been finalized but will be in the range of 1.70-1.85%.