Thursday, October 30, 2008

Green Resources Fund

This fund has recently become available under the Matrix Range of Funds from Eagle Star Life. If you are of the opinion that economic development and global population growth will drive demand for clean water supplies and alternative energy sources, then it may be financially prudent to take a closer look at what it has to offer.

It is a unit-linked fund that tracks the performance of the PowerShares WilderHill Clean Energy and iShares S&P Global Water ETFs. The current asset split on the fund is 75% Alternative Energy and 25% Water. This exposure is not expected to deviate much from 70%-80% Alternative Energy and 20%-30% Water.

These ETFs invest in renewable energy, power delivery, cleaner fuel, water utility and water equipment industries. As with any fund that invests in companies outside the EuroZone, a currency risk arises. When you add this to the limited sector that it operates in, it would be considered a Higher Risk investment fund and may be more suited to an investor as part of an overall portfolio.

The Fund is available to Pension, Savings and Investment clients of Eagle Star Life but excludes PRSA contracts. The Annual Management Charge is 1%pa of funds invested but do bear in mind that this does not include any transaction charges that are made within the ETF.

Friday, October 24, 2008

Celebration Bond

If you are the holder of one of these With-Profit Bonds through Norwich Union/Hibernian, it may be a good idea to put a note in your diary regarding the 10th anniversary of your investment.

The products that were sold during the period 1999 to 2002 have an underlying guarantee on the 10th Anniversary of the start date - and every subsequent 5th anniversary - that the company cannot impose a 'Market Value Adjustment' (MVA) on these dates. Unfortunately, the company are under no obligation to notify you that these important dates are coming up.

Under the terms of the contract, the price of the units held in this with-profit fund are guaranteed not to drop. This means that you are guaranteed your original investment plus attaching bonuses on the 10th/15th/20th etc. anniversary.

The current 'nominal' value of your investment could potentially be much higher than the 'surrender' value, as MVAs are applied outside of the guaranteed dates. If you are thinking about cashing in this bond at present, it may be prudent to wait until the 10th anniversary. It will put the policy holder 'in the driving seat' as the company cannot reduce the price of the units in the with-profit fund on the guaranteed dates.

Should market conditions continue in the same direction in the short to medium term, then this 'guarantee', on these significant dates, may become very valuable indeed. This may have prompted the company to place 80% of the fund in Fixed Interest Assets in recent days and the product is now closed to new business.

If your Celebration Bond had a commencement date outside of the 1999-2002 dates, then your guarantee applies to your capital only on 10th/15th/20th etc anniversary.

You should definitely review this investment, especially if you may need access to your capital between the 10th and 15th anniversary dates. Do remember that the 'window' that you can apply the guaranteed periods to, is limited to 14 days either side of these important dates.

Thursday, October 16, 2008

Blogger Interview - Charlie Weston

What is the best business/investment decision you ever made?
As a poorly paid PAYE worker I do not have a lot of investments, but I did make some profits on techie shares during the technology bubble in 2000.
Unlike most people, I actually made a few bob on the Eircom flotation. I sold soon after the IPO when the shares had risen by 25pc from their initial offer price.

What kind of car do you drive?
A very boring 2005 Ford Focus. I take the train to work and use a bike.

What is the worst financial advice that you ever received?
I have, over the years, been advised to put money into Anglo Irish Bank, to invest in overseas property, and to take out an Equitable Life policy. Thankfully, I ignored most of this daft advice

Do you own property abroad?No.

How does the economic slowdown effect you?
My pension, which is a defined benefit one, has a funding hole in it the size of a large crater. I and my colleagues are paying more into the scheme, while my employer, Independent Newspapers, has increased its contributions. A funding proposal has been agreed with the Pensions Board, but the scheme is still way behind target.
As a newspaper employee the downturn will affect advertising, so I expect my employer to seek staff-related cost cuts. This will mean more work for less money. Real incomes are set to drop for everyone next year because of the global downturn which has resulted from the credit crisis.

Do you contribute to a pension plan?
I contribute 9.6pc of my salary to a defined benefit scheme and €100 a month in AVCs (additional voluntary contributions). I am 44 and so expect to be increasing my AVC contributions in the years ahead.

What's your favourite film of all time?
'Cool Hand Luke' starring recently deceased Paul Newman - one of the greatest actors of our time.

Have you ever won money?
No. I have had Prize Bonds since I was born, and have been given more as presents over the years, but have never won.

Do you own your own home?
Yes. I have LTV tracker mortgage with National Irish Bank - ECB plus 50 basis points.

Do you invest directly in the stock market, through funds or both?I have an Exchange Traded Fund, which I contribute to monthly, based on the Irish Market. The fund is losing buckets of money at the moment.

What is your preferred method/system of saving (Deposits, Funds,Shares, Property)?
I save monthly in a regular saver deposit account.

What financial product/s do you consider to be bad value for money?
Payment protection insurance policies are bad value, as are the renewal premiums offered by motor insurers. Why is it that if you accept the renewal offer you will end up paying up to €300 more for motor insurance than you can get by scouring the market? Tracker bonds are also poor value, as the guarantee acts as a drag on the performance of the fund.

Do you trust your bank?
I have my mortgage with a Danish bank, my current account with an Irish bank and a lump sum savings account with a Dutch bank. No, I do not trust any of them. Irish banks have yet to come clean about the valuations of the land/properties used as security for the property-related lending they splurged on in recent years.

Charlie Weston is Personal Finance Editor with The Irish Independent

Wednesday, October 15, 2008

Absolute Return Fund (GARS Fund)

There's a new 'breed' of investment fund in town and it may be worthwhile to have a more in-depth look at the mechanics of it. The investment strategy that it adopts is akin to a hybrid of a Diversified Asset and Hedge Fund. The current offering from Standard Life has effectively made this type of fund available to the regular investor, without the stipulation of an excessive minimum investment.

The fund holds a broader range of asset classes, insofar as it includes your typical (equities,bonds and property) assets but also uses Derivatives to implement alternative investment strategies in a variety of market conditions.

The success of this type of strategy is broadly dependent on the skills of the fund managers in getting the mix of asset selection and investment strategies correct over time. It is anticipated that the Volatility Rating of this type of fund will be much lower than equity based funds, such as Managed or Consensus.

The relative performance of your typical Actively Managed Fund is measured by linking it to a benchmark Index or Consensus type Fund. The Absolute Return Fund has a Targeted Positive Return. The current, ambitious, target is the 6 month Euribor (currently 5.36%) + 5% (over a rolling 3 year period), Gross of fees (AMC 1.35%pa). Do bear in mind that the Euribor is 'inflated' under current market conditions.

Unlike the typical Hedge Fund, there are no out-performance fees but there are no 'penalties' imposed on the managers for not achieving the target either. Also, it does not borrow cash to invest in the fund.

It is my opinion that this type of fund would be a welcome addition to most investor portfolios. Given the relatively low volatility rating, this may be especially true for Trustees of Pension Schemes. As the fund is priced on a daily basis, it is more liquid than a managed fund that would have exposure to real property. This is important, as the fund manager should not impose waiting periods on redemptions. All things considered, the annual management charge is competitive @ 1.35%pa.

See Glossary for definition of terms.

Monday, October 13, 2008

Partnership Insurance

The sudden death/incapacity of a partner in a business can be a traumatic time for all concerned. Notwithstanding the emotional damage that will be caused to the family and work colleagues, it can also have very serious consequences for the future of the business.

The financial burden of dealing with such an event will fall mainly on the remaining partner/s to resolve, so it may be prudent to agree on a compensation package, to limit the potential damage to the business, prior to an untimely event, such as the death or incapacity of a partner.

It is possible for business partners to put a monetary agreement in place, whereby the value of each partners share in the business can be 'insured'. This has the effect of protecting the family of the deceased/incapacitated partner, by having funds available to the business. These funds will be used to buy the deceased/incapacitated partner's share of the business, so that the existing partnership will not have to be dissolved; and ensures that the remaining partner/s retain control of the firm.

There are a number of different ways in which a 'Partnership Insurance' can be structured and it is important to discuss these, along with agreed valuations of the business, with your financial advisor and legal representative before the 'compensation agreement' is set up. There are also strict Revenue and Tax Guidelines that must be adhered to, so it is equally important that these are given due consideration.

This type of insurance is worth exploring if you are in business with someone else. The consequences of not having it can jeopardise the future of a thriving business or lead to financial hardship for a partner's family.

Wednesday, October 8, 2008

Blogger Interview - Brendan Burgess

What is the best business/investment decision you ever made?
Setting up my current business 21 years ago is the best business decision. As a recruitment agency, it has done very well in the booming economy of recent years.

What kind of car do you drive?
My preferred mode of transport is a bicycle. I think the brand name is Trek. But I don't really follow brands.

What is the worst financial decision that you ever made?
I had an investment in a sports betting syndicate last year. It had done well, but I was uneasy about some aspects of its management. I cashed out and invested the proceeds in AIB shares. The sports betting syndicate has increased in value by 50% since…

Do you own property abroad?

How does the economic slowdown effect you?It keeps me very busy answering questions on from people who are in trouble.

Do you contribute to a pension plan?Yes. I have a self managed fund which is fully invested in shares.

Have you ever won money?Yes. I won the Business & Finance Investment competition around 20 years ago. I won around £1500 and a painting.

Do you own your own home?

Do you invest directly in the stock market, through funds or both?Directly mainly, but I also have an ISEQ eTf.

What is your preferred method/system of saving and investing (Deposits, Funds, Shares, Property)?Shares, Shares, Shares – especially now.

What financial product/s do you consider to be bad value for money?Worst of all is community rated health insurance for young healthy people who pay the same premium as old sick people. For old and sick people, it is the best value product.

Do you trust your bank?
Yes. And the feeling is mutual.

Brendan Burgess is the founder of

Monday, October 6, 2008

'Winding Up' of Pension Schemes

It is my opinion that there will be a major shift from 'Occupational Pensions Schemes' to 'PRSA Schemes' over the coming months and years. The reason for this movement of pension assets will be because, the obligations on 'Trustees' of Occupational Pensions will become too onerous in terms of what they will have to do to satisfy new legislation. The PRSA Scheme will offer the 'Trustees' the chance to relieve themselves of administrative and training obligations, that were absent up to this point.


Within 12 weeks of the decision to wind up an existing scheme, the trustees will have to notify the Pensions Board and and members of its intentions. If you are an 'active' (currently in the scheme) members, you should receive notification that existing funds and future contributions will be invested in a PRSA with XYZ Co.

If you are a 'deferred' (former employee) member, with pension assets still within the company scheme, you will be notified of the name of the company that the fund will be transferred to and what 'default' investment strategy has been selected for you. It will be up to you to change this strategy if the 'default' one does not suit your risk profile.

If there are employees that were excluded from the main Occupational Pension, for what ever reason, they should be notified that the PRSA Scheme will be available to them also.

It will be up to the employer to notify the existing pension company if the assets are to be transferred to another company. They will also alter the payroll to accommodate employer and employee contributions to the new PRSA Scheme.

There can be no charge on the value of the pension assets that are being transferred to the PRSA Scheme. The only charge that will be attributed to these funds will be the 1% Annual Management Charge. The regular contributions that will now be directed to the PRSA company, may have up to 5% of each contribution deducted, depending on the remuneration structure agreed between the employer and pension advisor.


i) The ownership of the PRSA will be in your own name. This differs from an occupational scheme where the pension benefits were held in trust on your behalf.
ii) Once an employer contribution is made to your PRSA it becomes part of your PRSA account and cannot be refunded to the employer.
iii) PRSAs provide you with a wider range of options at retirement
iv) Depending on the PRSA provider, you may have secure Internet access to your PRSA account to monitor values whenever you wish.
v) Contributions by employer and employee will continue at their current levels (not for deferred members).
vi) You should also be given contact details of the pension advisor to the PRSA Scheme and when they will be available for consultation