The Sygnia Stabilised Growth Fund, a brand new concept in managing retirement fund savings, has been launched.
“This fund targets a smoothed annual return of 5% above inflation with no costly capital guarantee charges which have typified old-style guaranteed funds offered by life insurance companies, charges which often deplete savings with no commensurate return on investment,” the company said in a media release today.
In the Sygnia Stabilised Growth Fund, as a default, the assets are invested in either a medium risk 100% passive balanced fund or a blend of active and passive strategies. Larger retirement funds may tailor their strategies and overlay them with Sygnia’s customised smoothing model.
“Sygnia’s robust smoothing methodology allows retirement fund members to enjoy the best of both worlds – participating in the long-term returns of a well-diversified growth strategy, combined with the benefit of less volatile returns over the shorter term,” the company added.
Bonuses are declared monthly in advance with a portion of investment returns held back during periods of relatively strong performance, to supplement returns that would typically be declared during periods of weaker performance. This process allows for a much more stable performance profile over time, but without the costly guarantee charges that are usually associated with these type of products.
Sygnia said its adoption of a “smoothing” approach rather than an explicit “capital guarantee” approach is premised on the fact that most traditional smoothed bonus products, albeit on paper offering guarantees on all or part of the invested capital and the declared bonuses, structure the products in such a manner that the guarantees are almost never likely to be invoked despite extremely high charging structures. Consequently the benefit of the guarantee is extremely low relative to the fees incurred.
“At Sygnia, it’s no secret that we like to challenge conventional thinking and do things in an innovative, cost-effective, and transparent manner. We understand that many people cannot tolerate the ups and downs of the investment markets, so the Sygnia Stabilised Growth Fund provides peace of mind and stability of saving for retirement without charging unnecessary fees,” said David Hufton, Head of Special Projects at Sygnia.
“We regard most guaranteed funds as a triumph of marketing over reason. We prefer to appeal directly to the reason.”