UK Traded Endowments

ORIGNALLY POSTED IN DECEMBER 2007

Dear Mr. Tan,

Recently, I was engaged in an online discussion about UK Traded Endowments. The other party suggested investing in UK Traded Endowments, which was able to give a better return than money market fund.

Are you familiar with this type of investment? What is your opinion?

REPLY

The fund manager buys the endowment policies from the customers and pay the premiums till maturity to collect the proceeds. You have to rely on the ability of the fund manager to manage the situation.

I do not know what charges are being taken away by the fund manager as their fees and expenses, and whether the remainder is a fair rate of return to the investor for the risk.

You have to study the following:

1. What is the underlying rate of return to the investor from the traded endowments?
2. What are the factors that could impact on the underlying return, e.g. reduction in bonus rates?
3. What are the fees taken away by the fund manager?
4. What is the net return to the investor?
5. What is the financial standing of the fund manager?