FUNDS: Skandia Deposit Fund

1954: Cash on Delivery - Muriel Box

Skandia are changing their Deposit Fund. This is a fund that is available to investors on their original product range, which includes Investment Bonds, Pensions and Maximum Investment Plans (MIPs). Skandia intend to effectively move this to Blackrock and used their Institutional Sterling Liquidity Fund. Skandia believe that this will provide greater expertise and a broader and even safer fund for investors seeking the equivalent of a deposit account. The fund currently places deposits with a range of Banks and Building Societies, but this has become increasingly difficult to manage in light of the various problems with various Banks.

Skandia expect to make the changes in March and there will be no additional costs for the changeover to investors. Letters are likely to be sent to those with holdings in the fund over the next two weeks. No action needs to be taken to approve the change.

The Blackrock Institutional Sterling Liquidity Fund was launched in 1998 and consistently outperforms its benchmark which is the 7-Day LIBID (London Interbank Bid Rate).  This is the rate at which Banks lend to each other for deposits from "overnight" to 5 years. As an Institutional Fund, normally the minimum investment would be £1m. The portfolio is made up exclusively of first tier securities and must have at least half of its holdings with a short-term rating of A1+. The fund qualifies as a UCITSiii Fund. There is a Fund Fact Sheet which says it is for Professional Advisers only, but anyone can actually view it with a web search. At the end of November the fund was worth nearly £21bn.

Clients with Skandia Life products will have holdings in this fund as it has formed a part of the portfolio. The team at Blackrock are well known in the industry for providing excellent cash management and have a very good record. However I shall be keeping this under review. Skandia do not plan to rename the fund, so it will still appear as the Skandia Deposit Fund. The Skandia (Life) Deposit Fund was one of the first funds that Skandia launched way back in 1979. At the moment, the interest rate on the Skandia Deposit Fund is much like most deposit accounts - poor. My view at this point in time is that as is often the case Skandia are taking a pro-active approach and recognising that in the current environment others are probably better at providing this service - hence moving the money to Blackrock.