Aviva to launch mutual fund-structured product hybrid

Aviva is launching a fund in the US that operates as a cross between a mutual fund and a structured product, combining liquidity and capital protection

Aviva launches new fund in the US

Aviva Investors in the US has announced plans to launch a fund that tracks the performance of four exchange-traded funds (ETFs) with capital protection provided by the purchase of US Treasuries.

The Multi-Asset Preservation (Map) 2015 Fund will open for investment on August 30. The fund works like a mutual fund but includes several characteristics of a structured product, such as a special redemption date in 2015 and capital preservation. "The Map Fund has features of a structured product. However, the advisory community is much more comfortable with mutual funds than with structured products." says Mark Cernicky, product development manager at Aviva Investors in New York. "The reaction has been very favourable. Several advisers have said they have been waiting for a product like this. We think the reason for this is that their clients are sitting in cash and advisers can use this product to get their clients back into the market again."

The Map fund tracks the S&P 500 Depository Trust (SPDR), MSCI EAFE Index ETF, Barclays TIPs Bond Fund and US Oil Fund ETFs, with weightings of 40%, 20%, 30% and 10%, respectively. The fund buys discounted US Treasury zero-coupon bonds that mature in 2015 to provide capital preservation. For each $10 share, the fund aims to return a minimum of $9 for each share invested.

Like an ETF, the fund has daily liquidity but is available through platforms and brokers rather than on an exchange. Investors can enter and exit the fund as they wish, but they benefit from increased capital protection if they stay in the fund until the special redemption date in 2015, when they will receive a distribution from the fund and can decide to stay in until the next redemption date in 2020.

The Map fund has an additional feature which locks in gains if the call option on any of the underlying ETFs reaches the price paid for it. If this level is reached the investor will receive any gains made.

The fund is aimed mainly at the registered investment adviser community, but institutional shares are available for a minimum investment of $50,000. It will be offered through Wealth Star, Aviva's practice management programme.