Zurich offers more fund units to Lehmans investors

Zurich has given investors additional units in the funds, applying the adjustment on 24 April.

Press reports implied these adjustments were effectively partial compensation for the write-off of the Lehman Brothers asset held within the funds last October.

As a result of the write-off, the Eagle Money Market fund fell in value by 0.7 per cent, while the Sterling Money Market fund fell by 3.6 per cent.

But Chris Holland, head of marketing of Zurich International Life, said: "We regularly review the performance of all of our funds, and following one such review, have concluded that our money market funds have held certain assets inconsistent with our product literature.

"We have therefore decided to adjust the value of policies invested in those funds by making an allocation of units to those policies which are still live and an additional payment in respect of those policies, which have matured or surrendered, where the value of those policies has been adversely affected."

The funds concerned include the sterling, euro, japanese yen, Swiss franc and US dollar Money Market funds.

Mr Holland said: "We have assessed the performance of the funds against their benchmark interest rate index on a day-to-day basis over the past two years and have adjusted the policies to offset against this benchmark."

The company declined to reveal the current asset allocation for the funds or the number of stocks held.

Mr Holland said: "Zurich International Life's money market funds include many different cash deposits and assets, all of which are subject to changes on a daily basis. As such, it is the group's policy and market practice not to disclose its exposure to, or performance for, particular asset classes or individual investments outside normal financial reporting requirements and processes."

While the adjustment to investors' holdings in the Zurich funds was not connected with the Lehmans insolvency, an IFA took the opportunity to highlight the fact that money market funds are not totally risk-free investments.

Will Beighton, investment adviser of Cheshire-based IFA Plan Invest, said: "People invest in these funds thinking they cannot lose money. But it is important when recommending such funds to tell clients they are not 100 per cent safe.

"Unlike deposit funds, which are more like interest-bearing bank accounts, these are cash funds, which buy short-term deposits, and investors' money is not fully protected."