Capitalising on the Hidden Value in With-Profits Funds

As most funds are now closed for new business the with-profits market is entering a long slow run off phase. This means that all existing reserves and surpluses will be shared amongst the remaining investors.

Many with-profits funds have  surpluses that have been built up over many years. These ‘orphan' assets mean even more hidden value in with-profits and will increase returns over the coming years.

As the with-profits funds approach maturity all of the reserves and surpluses need to be distributed. This distribution will need to take place over at least the last ten years of the fund to ensure equitable treatment of policy holder and that the last few policyholders don't get everything.

A number of funds are approaching the stage where this tontine effect (avoiding the last policyholder getting everything) has to be managed and this should lead to a further performance boost for traditional with-profits policies.

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The value of shares may fall or rise each month, this means that your capital is at risk when investing in EGF. This investment should be regarded as medium to long term in nature. If you withdraw from this investment in the first 5 years, exit penalties may be applied. It is only suitable for professional investors who understand the risks involved and investment should not be made prior to reading the prospectus. If in doubt seek expert advice. Nothing contained within this document constitutes investment advice or an offer to subscribe. Shares in the Endowment Growth Fund (EGF) are single priced with no bid/offer spread. Class A shares are offered in GBP and class B shares are offered in GBP, USD or EUR. Returns may be affected by fluctuations in currency exchange rates.