7IM launches deal for personal injury cash recipients
The 7IM Personal Injury fund will target an above-cash return through a diversified portfolio of bonds, equities and alternatives, designed to offer downside protection for investors with an irreplaceable lump sum.
The vehicle was developed in response to plummeting interest rates.
Whereas personal injury victims would have traditionally parked their pay-out in a cash deposit or a Court of Protection Special Account, both now offer just 0.5 per cent annual growth.
In the case of the Court of Protection account, this was cut from 6 per cent at the start of the year.
7IM said victims of personal injury were not "ordinary investors" and their complex financial needs were rarely catered for by standard investment products.
There was a danger IFAs may be tempted to put such clients into riskier equity-based portfolios in an attempt to beat cash returns, the firm said.
The 7IM Personal Injury fund will look to achieve its Libor-plus return with less volatility than the market.
Starting positions include a 30 per cent weighting to cash and gilts, split evenly between the two, with equities comprising just in excess of 10 per cent of the portfolio.
Around a third of the fund will be invested in bonds.
Remaining exposure will be distributed among direct property, commodities, index-linked gilts and other alternatives.
The groups said the product was the result of 12 months' discussion.
While 7IM will run the fund, looking after asset allocation and risk management, Nestor will act as consultant for the legal and financial issues behind the calculation of personal injury lump-sum damages.
Nicholas Martin, partner at Nestor, said: "We have been concerned about the investment strategies adopted by many personal injury victims and their advisers.
"Often, they are either faced with simply leaving their damages in cash deposits, which as we know, will rarely keep up with inflation, or invest the money into riskier investments that create issues – particularly if we look at the rollercoaster we have experienced in the past few years."
Tom Sheridan, chief executive of 7IM, said: "This is a vital issue for a vulnerable group. Our industry needed to address this problem and provide an effective solution.
"A rigorous discipline and process of investment and risk management must apply here, but at the same time ensure the necessary tenets of transparency covering investments and costs are included."
The fund is available through the 7IM platform or through administrator Capita.