Understanding our ILP sub-funds
What is a ILP sub-fund?
When you invest in one of our regular savings plans, such as Global Wealth Advance, the investment fund options available to you are from our range of Friends Provident International Limited ("FPIL") insurance funds which are called Investment-linked Policy sub-funds ("ILP sub-funds").
To cater for all investor attitudes and savings goals, the ILP sub-fund range contains a variety of fund types, across different sectors and geographical regions. It also offers different levels of risk, from currency/money market funds, to managed funds, to higher risk equity funds. Each ILP sub-fund has been given a risk/reward profile rating between 1 and 5 as a guide to the level of risk associated with it, 1 being low risk (such as cash type funds) and 5 being high risk (equity funds such as single country equity).
How does an ILP sub-fund work?
The concept is simple: we have agreements in place with well-known Asset Managers worldwide who operate their own investment funds from which we select to invest in. The investment funds we chose are based on a number of factors, including performance and the fund manager’s investment expertise. For each investment fund selected, FPIL sets up its own ILP sub-fund which then invests solely into the chosen investment fund (the ”underlying fund”), apart from a proportionately small amount which is usually held as a cash balance.
When you invest your premiums into one of our savings plans you will select which ILP sub-fund, or funds, you wish to invest in. Your premium received for each ILP sub-fund is then pooled together with other policyholders and we invest the monies into the underlying fund of the relevant ILP sub-fund. Policyholders will receive the relevant number of units on their policy representing their premium investment made into the ILP sub-fund.
When policyholders pay in premiums or request a switch between ILP sub-funds, units are normally bought and sold using the ‘bid’ (selling) price. However, some of our legacy products do contain a bid/offer spread. The relevant product literature will state if this applies.
Any changes that happen to the underlying funds, such as an amendment to its investment objective or policy, will therefore directly impact our ILP sub-funds. That’s why in our communications to policyholders and their advisers, if we are informing you about a change to an ILP sub-fund we will refer to 'the changes of the underlying fund' impacting our ILP sub-fund.
The unit price of each ILP sub-fund will be different from the underlying fund. This is due to the fact that the ILP sub-fund is launched on a different date from the underlying fund and often at a different starting price to the underlying fund's current price. But the movement in the unit price of each ILP sub-fund should move broadly in line with its underlying fund.
This type of fund structure is often called a mirror fund, because its unit price movement is 'mirroring' that of its underlying fund link.
Supporting information and tools
To help support you in monitoring the ILP sub-funds you are invested in, as well the ability to research future fund choices, we provide an interactive fund performance monitoring and research tool, called the Fund centre, which is available free for your use, and provides access to view the short and long-term performance of each ILP sub-fund, download fund factsheets, compare up to five ILP sub-funds side by side and carry out simple charting of one or more ILP sub-funds.
FPIL's governance of the ILP sub-fund range
Our in-house fund governance team is responsible for developing and maintaining our ILP sub-fund range, ensuring that we select only the best underlying funds from the global fund universe.
Our analysts carry out ongoing analysis of the underlying funds we have selected, ensuring they continue to remain appropriate in terms of performance and investment strategy. As a result of reviews, this may mean it is necessary to remove ILP sub-funds from the range, as well as adding in new options.
Our team has built up excellent relationships with leading asset management groups around the world, boosting our ability to offer a diverse range of ILP sub-funds to help fulfil our policyholders' investment requirements and satisfy their appetite for risk.
Important notes
Please note that there are fees for the ILP sub-funds that would in turn affect the return on your policy. These fees are built into the published unit price of each ILP sub-fund and therefore will not be seen as a separate deduction from your policy. For further details, please refer to the relevant product literature.
The ILP sub-funds are intended for medium to long-term investment and can only be accessed using FPIL’s unit-linked savings plans. These policies are also intended for medium to long-term investment and are not therefore designed for early surrender. There may also be restrictions on the amount of withdrawals available from a policy and you should refer to the relevant Principal Brochure for more information.
FPIL is the absolute legal and beneficial owner of all the assets which relate to each ILP sub-fund.
It is important to remember that, as with most investments, the value of investments is not guaranteed and can go down as well as up. You should only invest money that you can commit to in the medium to long term. Please be informed that securities held within a ILP sub-fund may not be denominated in the currency of that ILP sub-fund, so unit prices may fall purely on account of exchange rate fluctuations.