INSURANCE OF INVESTMENTS

Press, Volume C, Issue 29503, 3 May 1961, Page 19

INSURANCE OF INVESTMENTS

New Unit Trust In U.K. (N.Z.P.A.-Renter—Copyright) LONDON, May 1. A unit trust with a new gimmick was launched in London today. Investors can insure against loss if they hold the units for 10 years. If the trust shares rise the investor gains. If he retains them for 10 years he is guaranteed against loss. Two million units were offered for public subscription and were soon taken up. If by April 30, 1971, the bid price of the unit shares is less than the price of 5s 4d at which they were offered, the company will pay shareholders the difference. This guarantee will cost investors an extra 3d a share. Shareholders can retain their shares longer than 10 years or in effect sell without loss. Indemnity for the guarantee will be taken out with a big insurance company. Pilot Scheme

The “Daily Telegraph’s” financial commentator says that this is clearly a pilot scheme and its results will be closely studied. It opens up wide implications for moves by other unit trusts or insurance companies. “The only likely criticism is that unit trust investors are already paying a management fee and consequently should regard the investment ability of their trust as sufficient insurance against capital risk. "Offsetting that view, however, is the value of insurance cover of the type now put forward against unexpected sharp setbacks in markets. and where units are used as collateral.”