Bestinvest says
With base rates low expected returns from the product can also expect to be low. Whilst returns will also be affected by the performance of european equity markets , this exposure accounts for a small percentage of the overall fund.
The aim of the fund is to deliver as little in the way of income as possible with all the gains being attributable to the capital account. A capital drawdown facility is available for investors who require a regular income.
The portfolio is made up of four core elements: European equity, short dated government debt, a derivatives hedge and a derivatives overlay. The European equity, short dated government debt and derivatives hedge combine to form a portfolio that has the economic exposure of 18% equity and 82% sterling LIBOR, while satisfying investment restrictions such as the ISA and PEP rules. The equity portfolio tracks the Eurostoxx 50 index, while the debt element is passively managed currently consisting entirely of short dated Japanese government bonds. The derivative overlay strategy is designed to produce an additional 1-1.5% p.a.