Zombie funds...but who are the zombies?
Saturday 3 November 2007
The news that Standard Life and Pearl Life are bidding for Resolution Life is unlikely to stir any emotion from most investors. All the discussion relates to the opportunity for Standard Life or Pearl...they see an opportunity to make money. But let's set aside this discussion, instead perhaps we should discuss the policyholders of Resolution.
Firstly, what are Zombie funds? The Guardian glossary describes them as follows: "With-profits funds that have closed to new business, so called because they either neither fully alive nor dead. Thousands of people find themselves trapped in 'zombie funds', unable to get out because of stiff exit penalties. If they stay put their returns are likely to be below average"
Here’s the interesting point, on the one hand, the many thousands of investors with policies in so called Zombies funds are facing poor returns, yet the shareholders of the companies than run Zombie funds are laughing all the way to the bank. The share price of Resolution price has almost tripled over the last 4 years! Have the policyholders benefited from a threefold increase...I think not.
Perhaps if Resolution had invested all their policyholders money into their own shares everyone would be happy! Alas, that was not a viable option, but policyholders do have choices. Clearly both Pearl and Standard Life see an opportunity to make profits from Zombie funds. They also know that in the world of investment management, investors are loath to change...that means they can milk profits because investors don't take action. But if policyholders elected to vote with their feet and invested their capital elsewhere, perhaps they would stand the chance of a better return on capital. The moral of this story is review your investments and if you stay invested in Zombie funds, only do so after exploring all your options..and remember, the profits for shareholders from Zombie funds must come from high charges! Advice is essential.
Resolution plc is the largest specialist manager of in-force UK life funds with an estimated 7 million customers and combined life company invested assets of over £61 billion. Some of the principal life companies owned by Resolution plc include:
Alba Life Limited
Abbey National plc
Britannic Assurance plc
Britannic Retirement Solutions Limited
Britannic Unit Linked Assurance Limited
Century Life plc
Phoenix Life & Pensions Limited
Phoenix & London Assurance Limited
Phoenix Life Limited
Phoenix Life Assurance Limited
Scottish Mutual Assurance Limited
Scottish Mutual International Limited
Scottish Provident International Life Assurance Limited
Scottish Provident Limited
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posted by Murray Round Wealth Management @ 15:30,
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Nicholas Round
Nic is the Managing Director of Murray Round Wealth Management Limited, who seeks to ensure the advice provided is truly independent. Based in Shropshire with clients local, national and worldwide, Nic has strived to find the best possible service for his clients needs, by researching and studying the market, trends and philosophies. Nic strongly believes Asset Class Management will bring his clients Financial Freedom, Independence and Happiness.
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