Unit yardsticks
BULL
A partieularly useful guide to equity-linked kie assurance has just been published by Fundex Liraited—Equity Linked Assurance. The l'969 edition reviews seventy contract, and comes to some conclusions about results Equity-linked life assurance has been a fast- growing sector of the savings market. The unit trusts pioneered the idea (under which a with profits policy is linked to a specific equity fund). They were interested in secur• ing the tax reliefs available on life assurance premiums. Latterly the insurance companies themselves have got into the act, adding a wide variety of extras--fully guaranteed minimum payment on maturity, family in- come cover, convertible term amurance, and permanent disability benefits.
The available contracts have been assessed for likely benefits (on uniform assumptions for growth and income) under Ave headings--Age thirty, term fifteen years; age thirty, Isou thirty-five years; age forty. term fifteen years; age forty, term twenty- five years and age fifty. term fifteen years. Three policies stand out as likely to be more rewarding than the rest of the field: Equitas, Target and Prutrirt. Equitas is isaueMatthiLi London and Edinburgh Insurance company and the policy is linked with one of the Barclays Unicorn trusts, Unicorn Progres- sive unit trust. Minimum premium is £2 per month and minimum sum assured is £500. What are called the 'non-medical limits' are £10,000 and age fifty. The Target Equity Investment Plan is issued by Target Trust managers and is linked with the Target equity fund. The minimum premium is £5 per month and the non-medical limits are £10,000 and age forty or £5,000 and age fifty. Whereas no loans are available under the EquitisCPolicy, Target will loan 75 per cent of the surrender value at any time. The policy is under- written by the British Life Office. The Pru- trust policy, as its name indicates, is issued by the Prudential Assurance Company. The minimum premium is £4 per month. Loans are not available.
How are the unit trusts themselves, doing this year? At the end of the first nine months of the year the Financial Times all- share index was showing a decline of 18 per cent. The Unitholder index (the average per- formance of unit trusts) was slightly up, showing a decline of 17.8 per cent. In fact ninety-six trusts out of a possible 182 equalled or beat the all-share index over the first nine months. That, I suppose, is a moderately encouraging result. It includes a number of funds which are orientated more towards income than to growth. But the re- sult also illustrates the need to choose care- fully between the trusts. Far too high a pro- portion of them turn in humdrum perfor- mances. In fact the Unitholder's performance league in 1969 shows that the outright win- ner so far is Trustees and Professional In- come unit trust, which has managed to limit the decline in the value of its units this year to 4.4 per cent.
Trustee and Professional Income Fund is run by the Investment Assured group, which also has Investment Assured Income in third place (plus some rather gimmicky trusts near the bottom of the league). As its name sug- gests, Trustee and Professional Income is designed for trustees and the minimum hold-
ing is rather high at 2,000 units. Among the funds devoted to growth rather than income, Crescent Fund is doing reasonably well with a decline of 8 per cent in the first nine months of the year. It is run by Edinburgh Securities Company. It is still a fairly small operation which, so far as investment performance is concerned, is always an advantage. Two of the out and out go-go funds appear in the top ten—Oceanic Growth with a 10.6 per cent decline, and Surinvest only 11.7 per cent down.
How badly has it been possible to do this year? Bottom of the table with a 30.4 per cent decline is Securities of America. Next to bottom is Capital Expansion Trust (minus 28.5 per cent) managed by the same Invest- ment Assured group. This trust is, apparently, designed to back growth situa- tions and to spot companies likely to be taken over.
This sort of analysis, which concentrates on short term records, is frowned on by the industry itself. It would rather you looked at a record going back over many years. I must say I suspect this line as being a way of ask- ing to be given another chance. It seems to me to be a pretty good test of a unit trust management to ask, when the market falls 18 per cent in nine months, how did you cope?
Two other considerations add point to short-term records. These days the invest- ment management team behind a particular trust can change quite radically as bright men are moved around from group to group. Secondly, size has quite a lot to do with per- formance. It is easier to manage a small fund because you can limit the number of shares you hold, yet choose between a wide range. Moreover you can move in and out of a share without making too much of a disturb- ance. Possibly the best test would be to look at how the indus ry performed over the whole 1968-1969 bull market-bear market period— between, say, the moment when the Financial Times ordinary share index just broke through 400 and when it first slipped back through that level some months later.
ffolkes's indus4rial alphabet
Xis Jor Xerox
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