MoneyTalk (April 2004)

by Arch Financial Planning Limited

AN INVESTMENT FOR THE RISK AVERSE

We would like to draw your attention to a rather special fund that was launched by Credit Suisse Asset Management (CSAM) last week - the Target Return Fund. We believe that this fund should be a core holding for all risk averse investors. This is not a fund to make you rich but it should outperform the returns from a deposit account and the fund is designed to keep your exposure to risk very low.

Preservation of Capital

Preservation of capital is a key requirement for many investors and not just those who would traditionally be clasified as low risk. Up to now we have been limited to the use of cash products, With Profit Funds (although the widespread use of Market Value Reductions has reduced their effectiveness of late) and capital protected structured products.

Although CSAM points out that the fund cannot guarantee capital preservation, we believe that this new fund will be particularly attractive to low risk investors and investors who already have investments in fixed interest funds but who wish to broaden their portfolios away from just UK bonds.

To Top

Positive Returns Year In and Year Out

The fund is a global fixed interest fund but with a special design which seeks to provide positive returns to the investor, year in, year out, whatever the market conditions. CSAM believes that this is achievable because many global fixed interest opportunities have a low correlation to one another and this will minimise the fund's overal risk profile. In fact, for those who follow such things, CSAM expects the fund to have a standard deviation roughly mid point between the FT Under 5 Year Gilt Index and the FT British Government All Stocks Index. The fund can move to 100% cash if necessary.

The aim of the fund is to target a gross return of 6-Month Libor plus 2.5% which is currently a return of just over 7.0% pa. Once the annual management charge of 1.25% is deducted the gross return before tax is currently expected to be around 5.75% pa, somewhat ahead of the best variable rate deposit account. The benefit of a target linked to Libor (the London Inter-Bank Offer Rate) is that as interest rates rise then the return to investors should increase.

To Top

The Concept Has Been Tested

The fund can invest in UK and overseas government bonds, money market instruments, high grade fixed interest debt, high yield debt and emerging market debt. The fund can also include convertibles which brings an element of equity participation into the fund. Ultimatelly the fund can invest 100% in cash if thought appropriate.

CSAM believes that the targeted positive returns are possible because an historical analysis over the last eight years has shown that there are always some fixed interest products that deliver quality returns at any point in the economic cycle. They have also been testing this concept with institutional investors since August 2000.

To Top

Professional Fund Management

The fund is set up as an ICVC (Investment Company with Variable Capital) which is the new name for OEICs and unit trusts. An ICVC is a form of collective investment scheme that allows investors to pool their contributions with those of other people, to create a portfolio of assets. Professional fund managers then invest the money in shares and securities in a number of companies. Having a wide range of holdings lowers the risk compared to investing in a single security.

The fund uses the CSAM team of five fixed income professionals supported by a fixed income credit and equity research team of over 30 analysts. CSAM was accredited as being one of the 'Best Fund Managers - Bond Funds' at the 2003 European Fund Awards held in Luxembourg. In order to achieve an optimal asset allocation in the fund, CSAM also uses a dedicated risk management tool that was developed especially for the target return concept.

As at 31 December 2003, CSAM employed 1,963 people worldwide and had global assets of £178.4bn. CSAM is part of the Credit Suisse Group, one of the world's largest financial organisations with around £544bn in assets under management.

To Top

Charges and Obtaining More Details

The charges are 4.25% initial (which includes 3% commission to us) and 1.25% pa (which includes 0.5% pa commission to us). The minmum investment is currently £5,000 although the fund is expected to be available shortly through the Cofunds Fund Supermarket, when the minimum investment will reduce to £1,000.

If you are interested in receiving more details of the Credit Suisse Target Return Fund, without any obligation on your part, please make contact with your Arch adviser, or email direct@arch-fp.co.uk, or telephone Sarah Bond on 01483 204600.

To Top

Risk Warnings

An investment into an ICVC, OEIC, unit trust, or other collective investment scheme is intended as a long-term investment. It is important that you are aware that the value of units in a unit-linked investment such as an ICVC, OEIC, unit trust, or other collective investment scheme, as well as any income which they generate, can fall as well as rise. If you surrender the contract, especially during the early years, you may get back less than you have invested. Where past performance is mentioned please note that the past is not necessarily a guide to future performance.

IT IS IMPORTANT TO NOTE THAT YOU SHOULD NOT ENTER INTO ANY INVESTMENT ON THE STRENGTH OF THE EXTREMELY LIMITED INFORMATION GIVEN HERE. The information given is based on our understanding of the product and it is not intended to replace your own reading of the literature provided by the product provider. Please contact us and we will provide you will full details of the investment prior to making any decision to invest.

To Top

Unsubscribe: Click here if you no longer wish to receive issues of MoneyTalk from Arch Financial Planning Limited

Subscribe: If you have a colleague who would like to receive MoneyTalk please ask them to email us at subscribe@arch-fp.co.uk

Feedback: We hope you continue to benefit from this Arch service. Do please let us have your comments or feedback at anytime

Arch Financial Planning Limited

Head Office & Registered Office: Caswall House, 6 Wharf Street, Godalming, Surrey GU7 1NN
Tel: 01483 527278, Fax: 01483 527279

Administration Office: Arch House, Collins Court, 39 High Street, Cranleigh, Surrey GU6 8AS
Tel: 01483 204600, Fax: 01483 204611

AUTHORISED AND REGULATED BY THE FINANCIAL SERVICES AUTHORITY

DISCLAIMER
This message is confidential and for use by the addressee only. If you are not the intended recipient, you must not use, disclose, distribute, copy, print or rely on this message. Please notify the sender by return email and then delete the message from your computer. Arch Financial Planning Limited disclaims all liability of whatever kind (including for negligence) to anyone other than the intended recipient(s). Arch Financial Planning Limited accepts no responsibility for changes made to this message after it was sent nor for any loss or damage from receipt or use. We have endeavoured to ensure that this email is virus free but we advise that in keeping with good computing practice, the recipient should make his or her own checks.