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New Protected Growth 2 Fund launched

Our Protected Growth 2 fund aims to offer investors exposure to some of the upsides of equity investment returns, while limiting the potential downsides by providing a defined level of protection. It could be a very useful part of a portfolio - particularly when the markets are volatile.

For more information about how the fund can be used as part of an income or growth portfolio, read our guide.

How the fund works

The fund's assets are invested to gain exposure to a mix of UK equities and cash. The equities/cash ratio is determined by a formula.

The formula is calculated so that when stock markets are performing well, your clients get increased exposure to equities to take advantage of the growth potential and reduced exposure to cash. In other words, when markets are rising, we move the fund's assets from cash to equities. Similarly, when markets are falling, we move the fund's assets back to cash.

The fund's equity exposure is achieved by investing in a FTSE All-Share tracker fund, managed by BlackRock, while the cash element is cash on deposit with Barclays Bank Plc. We don't guarantee these returns and please remember that the value of any investments may go down as well as up.

Although the Protected Growth 2 fund offers protection, it isn't a guaranteed fund.

Investment approach

We've appointed Barclays Bank plc to manage the ongoing asset allocation (the split between equities and cash). It makes sure that exposure to equities is restricted to a maximum of 70% of the fund's assets, so there's a minimum cash exposure of 30%.

Barclays Bank plc reviews the proportions of equity and cash exposure every day to make sure the asset allocation corresponds to the formula. This means the asset allocation isn't left to the fund manager's discretion. The fund is also priced each day, so investors can get frequent valuations and pay in or withdraw funds regularly.

Ongoing protection

One of the main features of our Protected Growth 2 fund is that it provides an ongoing defined level of protection.

The units in our Protected Growth 2 fund are bought and sold at the current unit price, but the fund also has a protected unit price. This is 80% of the highest-ever price during the fund's lifetime.* The same protected unit price applies to all investors and is published every day as a net price after costs.

*Please note that for products with a bid and offer spread, the 80% protection applies to the bid value.

Performance

Our first Protected Growth fund was launched in 2005. During its term, it showed it could give investors a controlled level of exposure to UK equities plus the comfort of knowing at least 80% of their initial investment was protected.

If your client had invested in our first Protected Growth fund at launch, 80% of their original investment would have been protected straight away. To illustrate its virtues, on the fund's fourth anniversary (March 2009), 99.4% of their investment would have been protected**.

**Source: Produced by AEGON Scottish Equitable using Lipper Hindsight 5, March 2005 - March 2009.

Please note: an investment's past performance is no guide to its future performance.

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