Neptune founder and chief executive Robin Geffen has revealed the worst personal investment he has ever made, and cautioned that advisers risk making the same mistake for their clients now.
Mr Geffen said that in February 1993 he took out a £100,000 mortgage, and invested monthly sums in a unitised with-profits fund.
He said like many other homeowners at the time, he was sold the with-profits product on the basis gains from the investments made by the fund would eventually pay off his mortgage.
Mr Geffen's said the fund contained “equities, bonds, property, and you had various actuaries doing clever things to smooth out the returns".
"I was told it would never go down. It was a fiendishly complicated investment with a lot going on under the bonnet.”
The Neptune boss said he invested over £71,000 in units of the with-profits fund over 25 years on a monthly basis.
But when the investment matured he received just £64,000 back. As a result, Mr Geffen was unable to use the investment as it was sold to him, namely to pay off his interest-only mortgage.
Mr Geffen said: “And this was during a period when equities had a very good run, bonds were in a bull market and property went up a lot.”
With-profits funds are currently on the regulator's radar again.
FTAdviser reported in July that the Financial Conduct Authority (FCA) was writing to providers of with-profits products as part of a review into the sector.
Mr Geffen said he was highlighting his experience because he fears many investors are being directed into similarly complex products that are also poorly performing.
He particularly highlighted investors being directed into certain funds by advisers who are determined to invest in low volatility products, even if it as the expense of investment returns.
David.Thorpe@ft.com
