InvestmentsAug 13 2014

Compass structured fund ‘tackles exchange rate risk’

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Compass Global Wealth has unveiled a Structured Product Fund, a euro and US dollar share class targeted at the expatriate investor community.

The product has been designed for investors wanting medium- to long-term capital growth, with target returns of 5 per cent to 15 per cent a year with a moderate level of risk. The fund, which primarily invests in structured products, aims to deliver growth at a level higher than can be achieved from a fixed-rate deposit with a bank.

Investors can access the fund with a minimum investment of £1,000, $1,000 or €1,000, the company said in a statement.

Andy Gibson, director of Hampshire-based Compass Global Wealth, said: “With advisers and investors naturally looking to invest in the base currency of the investor’s country of residence, the addition of these two new share classes has, we believe, further widened the appeal of The Structured Product Fund.

“The Structured Product Fund was launched to market in February this year solely with a GBP share class. In the past 18 months we have seen significant demand from advisers for euro and US dollar share classes, hence the issue of these new share classes.”

The fund invests in assets that are priced on a mark-to-market basis, which means the fund price reflects the value at which underlying investments can be sold.

The price published is the price at which investors can invest and redeem shares in the fund.

The fund has a weekly valuation date and a weekly dealing date, with the assets held in the fund offering daily liquidity.

There is an annual management charge of 1.75 per cent, and exit charges during the first five years of investment.

Provider View:

Mr Gibson said: “The new euro share class is doubly attractive to investors following the European Central Bank’s decision to cut euro interest rates from 0.25 per cent to 0.15 per cent in June 2014. Interest rates are a key driver in establishing the potential returns on structured products, and the rate cut has inevitably led to an increasingly difficult market for new products denominated in the euro. A key appeal of The Structured Product Fund is its ability to access both new products – primary issuance – and also those already in existence – secondary market. We will be looking for opportunities to take good value positions in the latter as subscriptions are received.”

Adviser View:

Pete Matthew, managing director of Cornwall-based Jacksons Wealth Management, said: “Exchange rate risk is something that many investors and some advisers neglect, and they do so at their peril. I think that having share classes denominated in different currencies is a good step forward in addressing this.”

Charges: There is an annual management charge of 1.75 per cent. Furthermore, in the first five years of the investment, exit fees are applied which start at 5 per cent in year one and then fall by 1 per cent each year.

Verdict: The addition of two new share classes matches the demand from financial advisers and investors. By considering the cut euro interest rate and exchange rate risk, two new share classes will make The Structured Product Fund more attractive.