Morley Fund Management has structured an investment product linked to a basket of its funds and chose UBS as the counterparty partly because of its high credit rating.
In the structure, called Norwich Active Protector Fund, UBS protects investors' capital through constant proportion portfolio insurance. The Swiss bank also provides gap risk insurance. Jeremy Soutter, product developer at Morley in London, explained it picked UBS because of its AA plus credit rating and its innovation in CPPI structures.
The way the product is designed means Morley can actively manage the investment portfolio and switch the funds in the basket. UBS will only hold between 10-20% of any underlying fund to act as a hedge, according to Soutter, who added the funds in the basket are large enough that hedging by UBS will not impact the value.
Morley launches the product on Tuesday and Norwich Union, a U.K. insurance company, will distribute it. Aviva owns both Norwich Union and Morley.