Old Mutual, a London-based investment manager with GBP3.5 billion (USD6.2 billion) under management, is launching a capital protected fund of funds in the U.K. Barclays Capital will provide 80% capital protection on the open-ended fund through put options written on units of the fund. The 80% protection level is referenced to the highest level of assets under management so each time a new high is recorded, Barclays will write a new put option.
Officials at Old Mutual will manage the fund through constant proportion portfolio insurance, which means they will allocate investment between a cash portfolio and a portfolio of managed accounts, said Richard Tomlinson, fund manager. Using managed accounts boosts the liquidity and transparency of the product and using a cash deposit as the 'safe' asset class in the CPPI structure eliminates interest rate sensitivity the fund would have in a zero-coupon bond-based structure, he noted. Old Mutual chose Barclays as counterparty on the deal because it wanted a name recognized in the U.K. and also because it had experience working with the firm on other funds, said Tomlinson.
The fund will launch in September and will be available to both onshore and offshore investors. It was seeded by Old Mutual in April with GBP22 million.
