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Multi Manager Bonds
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The investment return on this type of bond relies on the skill of the fund management team, the risk profile of the fund and the geographical sector in which the fund is invested.
You can switch between different types of investment within your bond at a very nominal cost and your first switch in any 12 month period is normally free. This useful feature allows you to move from an investment area you would prefer not to be in.
Managed bonds come under many different guises. For example Funds of Funds invest in other funds within one life company. These funds tend to be suitable for investors who are attracted by the tax efficiency of investment bonds but prefer to leave investment decisions or fund choices to professionals. However, beware of "double-charging" where you have to pay the charge on the underlying fund and another charge for the manager of the fund of funds.
Typically, you are asked to choose between the following types of funds:
Adventurous - The fund manager takes greater risks in the pursuit of higher gains; these funds are, therefore, ideally suited to the younger investor or the investor who can afford to wait until markets recover should the risk prove adverse. The top performers in this market place in any year do exceptionally well but may then do exceptionally poorly in the next year.
Balanced funds - The fund manager mixes the choice of volatility rated funds within its portfolio, part low risk, part medium risk, and part high risk. The fund manager will constantly look for opportunities to make gains for the fund but will also take a defensive position when market conditions dictate that this would be prudent.
Cautious funds - The fund manager will always take a cautious and low risk approach to the stock selection for the fund. Blue chip stocks are selected which are expected to have low share price volatility and reasonable dividend income returns. Other low risk investments such as gilts and other fixed interest stocks provide the fund with good returns but low risk.
It is important to remember that past performance is not a guide to future returns and the value of units can go down as well as up. You therefore might not get back what you initially invested. Therefore these bonds should be viewed as a medium to long term investment and you should realise that there may be a penalty incurred if a surrender takes place within the first five years of the policy life.
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