Investment Bonds

Unit-linked funds - choice of investment fund

There is an extensive range of funds available which maybe suited to your investment requirements.

Managed/balanced funds
These normally invest in a balanced portfolio of other funds. The main investments are normally equities, but managed funds also have significant holdings of fixed-interest securities, property and some cash deposits. They offer the opportunity to benefit from a well-diversified portfolio, where the insurance company may make some adjustments to its asset allocation according to the prevailing market conditions.

• Managed funds are typically the biggest funds of insurance companies and they are often regarded as their flagship funds in terms of investment performance.
• They are usually less volatile than equity funds, because of the level of property and fixed-interest investments that they hold. Managed funds generally under perform equity funds, but over the long term they often perform better than property or fixed-interest funds.

UK equity funds
UK equities have performed very well over the long term, although there have been many periods of short term fluctuation and negative returns. UK equities have a number of advantages as investments:

• The UK stock market is one of the largest in the world; it is well regulated and there is a well-developed culture of shareholder value.
• UK equities provide generally higher yields than are available from most major markets
• Most major UK companies are global businesses, with a substantial international exposure.

International funds
The main advantages of investing overseas are:

• Globally spread investments should be less volatile than purely UK portfolios. The economies of the world are often at different stages in their investment cycles. By investing in different markets, you can smooth out the overall volatility of your investments.
• Many of the world's best companies are located in other countries; by confining your investments to the UK, you could be missing valuable opportunities. In particular, the UK market has little or no exposure to certain types of businesses, such as automobile manufacturing.
• In general, there have been some economies that have grown consistently faster than the UK.

Funds that are invested wholly or partly outside the UK may be affected by exchange rate fluctuations.