# zurich Super cap fund



## Biddy (30 Jul 2013)

Can anyone give advise on the Zurich Super Cap Fund.  I have some cash I want  to invest long term (10 years approx.) and it has been suggested to me that this is a good option.  
Any feedback or better suggestion as to investment options? Appreciate any guidance!


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## mercman (30 Jul 2013)

Biddy, I do not know anything about the fund you mention. However nI do know that investing ones money into ETFs are normally a better option. The reasons for this is the Management Charges applicable to ETFs are normally far less that Insurance companies Management charges. There are no funds that will protect an investor from the ups and downs of markets performance. However to pay AMCs and inflated TERs applicable to funds is pure madness. 

It is easier and best to watch your own money grow rather than watch the fund manager grow fat.


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## DerKaiser (30 Jul 2013)

mercman said:


> Biddy, I do not know anything about the fund you mention.


And yet....


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## mercman (30 Jul 2013)

DerKaiser said:


> And yet....



The point I was trying to make is that an investor has a better chance of achieving a better return by investing in ETFs rather than in funds operated by Insurance companies. Based on the sector, the fund managers invest in the same or similar equities.

It's all down to the costs of managing such funds. Simple as that.


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## Jim2007 (31 Jul 2013)

DerKaiser said:


> And yet....



Exactly!  We have no idea of the OPs investing objectives.... but that does not stop some of us.....


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## DerKaiser (31 Jul 2013)

Jim2007 said:


> Exactly! We have no idea of the OPs investing objectives.... but that does not stop some of us.....


 
Spot on. no idea of:
1) What the fund is / does
2) The charges and running costs of the fund
3) The level of expertise of the OP
4) The amount the OP has to invest
5) The OP's tolerance for risk 
6) How qualified the broker is and how dilligent he has been in his recommendation


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## Biddy (31 Jul 2013)

Many thanks for the feedback, one question there is mention of ETF's can you explain to me what they are?  As you can see I am a novice to all of this!


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## DerKaiser (31 Jul 2013)

Biddy said:


> Many thanks for the feedback, one question there is mention of ETF's can you explain to me what they are? As you can see I am a novice to all of this!


 
If you ask Mercman for his details, being a qualified financial advisor no doubt, I'm sure he will be willing to volunteer some time to take you through the whole process and get you set up and revert back with regular advice. 

In the absence of that, I can give some pointers on the SuperCapp fund that *you should get more info on from your broker*. 


It is a with-profits fund
It comprises of european government bonds and equities.
Large gains or falls are limited through an investment hedge.
Certain guarantees may be available e.g. guaranteed return of fund at 10 years from inception.
In my opinion it is suitable for someone:

With a longer term investment horizon (at least 5 - 10 years),
who would like a steady return not subject to massive volatility
Who would like the option of a return of initial capital at some point
Who wants some exposure to equity returns, but not excessively
 
Financial advice is not simple, it is not free and not everyone is qualified to give it. It is foolish for someone inexperienced not to seek financial advice from a qualified professional. At the same time, it's good practice to second guess that advice.


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## mercman (31 Jul 2013)

DerKaiser said:


> If you ask Mercman for his details, being a qualified financial advisor no doubt, I'm sure he will be willing to volunteer some time to take you through the whole process and get you set up and revert back with regular advice.



Thankfully I am NOT a qualified financial adviser. I am an ordinary investor that has been put through the HOOPS by Irish Financial Providers. What I have placed in writing is well documented on the web, and in various articles written concerning the costs and effects of Management Fees on index linked funds versus the lower costs of an ETF.

Any investor must make their own investment decisions and therefore I am unable to comment on the fund mentioned.


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## rayn (31 Jul 2013)

To answer your question  ---WIKIPEDIA will tell you all about Exchange traded funds.


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## Marc (31 Jul 2013)

this post might help 

http://www.askaboutmoney.com/showthread.php?t=86566&highlight=with+profits+bond


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## Steven Barrett (10 Sep 2013)

Biddy

Zurich Life's SuperCAPP fund has been around for years and has a very good track record. You can expect a gross return of c. 4% per annum. Unfortunately in these With Profits type funds, the charges are not very clear and you can't find out what they are. 

As for investing in ETF's, there are literally thousands of them, so you have to be careful as to which ones you invest in. What an ETF does is track the market and doesn't make any active calls. A fund manager will try to look for opportunities to make alpha i.e. use his skill to get a better return. As markets and prices generally find their correct level in the long term, it is near on impossible for a fund manager to consistently outperform the market. 

Whether you choose to use the ETF route or active management, or a combination of both, you need to have a diversified portfolio and a strategy aligned to your goals. Looking at the SuperCAPP fund would say to me that you are looking for a lower risk investment strategy. Investing in ETF's is the opposite to that. You need to strike the right balance.


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## ClearFinance (15 Sep 2013)

Shortfall is a good fund for a steady investor. You get a bonus if your inthe fund for five years.will give you between two to four percent annually with a bonus each five years of two to three percent.been a popular fund over the years.only recentlydid Zurich remove the age restrictions on it....


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## ClearFinance (15 Sep 2013)

ClearFinance said:


> Shortfall is a good fund for a steady investor. You get a bonus if your inthe fund for five years.will give you between two to four percent annually with a bonus each five years of two to three percent.been a popular fund over the years.only recentlydid Zurich remove the age restrictions on it....




Meant supercapp not shortfall...predictive text at its best


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## kateball (19 Sep 2013)

SBarrett said:


> Biddy
> 
> Zurich Life's SuperCAPP fund has been around for years and has a very good track record. You can expect a gross return of c. 4% per annum. Unfortunately in these With Profits type funds, the charges are not very clear and you can't find out what they are.


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## LDFerguson (21 Sep 2013)

The historic track record of this fund is undeniable. Granted the annual dividend has been dropping consistently for the past few years but the bonus after five years tends to compensate a bit. I also have respect for Zurich as a fund manager in general. 

But I will admit to having some niggling concerns about the fund's composition - 78% Euro bonds at 30/6/2013. Bear in mind the fund itself is nearly €1.5 billion in size. Just from a very basic asset allocation perspective, that seems like an awful lot to allocate to Euro Bonds, even if we ignore any speculation about Euro Bond risks. I've raised this concern previously with Zurich and they're comfortable with it, largely on the grounds that they employ swaptions as a form of insurance against major downside risk.  But they're not exactly an impartial commentator.  

I'd be interested to hear if any of the learned contributors here have any comments.


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## Duke of Marmalade (23 Sep 2013)

LDFerguson said:


> The historic track record of this fund is undeniable. Granted the annual dividend has been dropping consistently for the past few years but the bonus after five years tends to compensate a bit. I also have respect for Zurich as a fund manager in general.
> 
> But I will admit to having some niggling concerns about the fund's composition - 78% Euro bonds at 30/6/2013. Bear in mind the fund itself is nearly €1.5 billion in size. Just from a very basic asset allocation perspective, that seems like an awful lot to allocate to Euro Bonds, even if we ignore any speculation about Euro Bond risks. I've raised this concern previously with Zurich and they're comfortable with it, largely on the grounds that they employ swaptions as a form of insurance against major downside risk. But they're not exactly an impartial commentator.
> 
> I'd be interested to hear if any of the learned contributors here have any comments.


I hasten to assure you that I am not answering the call for a "learned" contribution but a scan of the website reveals that Supercapp dividend in 2012 was 2.75% and there was no bonus except for policies invested before 1990, when I guess there was enough equity content and performance to justify a bonus.

So after the annual management charge of 0.75% expect a return of about 2% p.a. And what more can you expect if 78% of the fund is invested in sovereign bonds which themselves only earn around 2% p.a. Swaptions protect the company against falls in interest rates increasing the cost of any guarantees. They do not protect against sovereign risk and they do nothing to improve investment performance.


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## DerKaiser (23 Sep 2013)

Duke of Marmalade said:


> Supercapp dividend in 2012 was 2.75%


This is down to 2% for 2013 (interim) or 1.25% after a typical 0.75% management charge



Duke of Marmalade said:


> and there was no bonus except for policies invested before 1990, when I guess there was enough equity content and performance to justify a bonus.


Definitely not the case - worth checking with a broker



Duke of Marmalade said:


> Swaptions protect the company against falls in interest rates increasing the cost of any guarantees. They do not protect against sovereign risk and they do nothing to improve investment performance.


You're half right.

No protection in a sovereign default (other than the point at which the money back guarantee kicks in).

The swaptions are to protect the _policyholder _against significant _increases _in bond yields and capital losses.


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## Duke of Marmalade (24 Sep 2013)

DerKaiser said:


> This is down to 2% for 2013 (interim) or 1.25% after a typical 0.75% management charge
> 
> 
> Definitely not the case - worth checking with a broker
> ...


 
On the bonus, I am only going by what is on their website. 

No way are the swaptions to protect policyholders. If they are then that points to even less potential for returns. You can't get blood out of a stone. If you invest in bonds earning 2% p.a. no amount of swaptions or any other magic is going to increase that. If it makes sure that it will be achieved should interest rates rise then it makes sure it will be achieved if interest rates falls. Let's get real, if you invest in 2% p.a sovereign bonds there is no way that any jiggery pokery with swaptions will enhance that potential.


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## DerKaiser (24 Sep 2013)

Duke of Marmalade said:


> Let's get real, if you invest in 2% p.a sovereign bonds there is no way that any jiggery pokery with swaptions will enhance that potential.


We're not talking about enhancing the return, we're talking about protecting the customer from capital losses in the event of significant increases to bond yields. That's why the swaptions are there. They're an insurance. The premium is the loss of upside in the event of further interest rate falls, the benefit is avoiding serious capital losses if interest rates go up.


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## Duke of Marmalade (24 Sep 2013)

DerKaiser said:


> We're not talking about enhancing the return, we're talking about protecting the customer from capital losses in the event of significant increases to bond yields. That's why the swaptions are there. They're an insurance. The premium is the loss of upside in the event of further interest rate falls, the benefit is avoiding serious capital losses if interest rates go up.


The Swaptions are there as insurance against large drops in the value of the fund.  But the punters have this insurance in their contract anyway so this is only protecting the company from the guarantee being called.  Insurance costs money.  It is in fact a hidden charge.


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## DerKaiser (24 Sep 2013)

Duke of Marmalade said:


> The Swaptions are there as insurance against large drops in the value of the fund.  But the punters have this insurance in their contract anyway.


Only at specified points i.e. chosen retirement date on pensions or 10 years in on investments. So if, for example, you've been 15 years in the fund and want to switch out, the use of swaptions to control of investment volatility ensures that you don't have to worry about any sudden fund drops in the months or years before you switch.



Duke of Marmalade said:


> so this is only protecting the company from the guarantee being called..


It is true that anything that protects the customers from large losses reduces the possibility of the guarantee costing the company lots of money.  



Duke of Marmalade said:


> Insurance costs money.  It is in fact a hidden charge.


Downside protection does cost money, the cost is the loss of upside gain if bonds make significant capital gains. This is not hidden. The control of volatility is a stated aim of the fund.


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## Duke of Marmalade (25 Sep 2013)

DerKaiser said:


> Only at specified points i.e. chosen retirement date on pensions or 10 years in on investments. So if, for example, you've been 15 years in the fund and want to switch out, the use of swaptions to control of investment volatility ensures that you don't have to worry about any sudden fund drops in the months or years before you switch.
> 
> 
> It is true that anything that protects the customers from large losses reduces the possibility of the guarantee costing the company lots of money.
> ...


It is more normal and transparent for the company to charge, say, 50bp for the guarantee and buy the swaptions for its own account. 

Swaptions are just like insurance.  They pay out on the trigger of the downside risk but on all other occasions, and not just those where there is an equivalent upside, the premium is lost.


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## DerKaiser (25 Sep 2013)

Duke of Marmalade said:


> It is more normal and transparent for the company to charge, say, 50bp for the guarantee and buy the swaptions for its own account.



The guarantee, available at certain points such as the retirement date, is actually free to the customer as it was priced in the 70s/80s when such guarantees were viewed as worthless.

Payouts at all other dates are dependent upon fund performance. The aim of the fund is to have limited volatility to deliver stable fund returns and this is achieved by holding equity collars in conjunction with the equity holdings and swaptions in conjunction with the bond holdings.

I think you're mixing up the separate situations in which swaptions can be used (a) by companies to hedge guarantees the provide to customers and (b) in policyholder funds to help reduce volatility of investment returns


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## Duke of Marmalade (25 Sep 2013)

DerKaiser said:


> The guarantee, available at certain points such as the retirement date, is actually free to the customer as it was priced in the 70s/80s when such guarantees were viewed as worthless.
> 
> Payouts at all other dates are dependent upon fund performance. The aim of the fund is to have limited volatility to deliver stable fund returns and this is achieved by holding equity collars in conjunction with the equity holdings and swaptions in conjunction with the bond holdings.
> 
> I think you're mixing up the separate situations in which swaptions can be used (a) by companies to hedge guarantees the provide to customers and (b) in policyholder funds to help reduce volatility of investment returns


Swaptions do not reduce volatility in investment returns.  They cut off the downside risk at the expense of a loss of expected return overall.  I am not referring to policies issued in the 70s/80s, I am referring to policies issued today.  They may value their guarantee but they should be aware that they are paying for it in reduced overall expected returns.  The guarantee today is not at all free, but its costs are far from transparent.


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## DerKaiser (26 Sep 2013)

Duke of Marmalade said:


> Swaptions do not reduce volatility in investment returns. They cut off the downside risk .


Those two points are not internally consistent



Duke of Marmalade said:


> at the expense of a loss of expected return overall..


Why? Swaptions are liquid assets. Trading costs do not vary much from bonds. 



Duke of Marmalade said:


> I am referring to policies issued today. They may value their guarantee but they should be aware that they are paying for it in reduced overall expected returns. The guarantee today is not at all free, but its costs are far from transparent.


The most recent versions have a money back on retirement (on pensions) or after 10 years (on investments) guarantee, far less generous than in the past. This guarantee, as well as commissions and expenses, would have been priced into management charge, bid offer spread, etc. 

The _overall_ charges are transparent and the benefits are transparent. If you are saying that the customer does not know what proportion of their charges are to cover each of commissions, expenses, guarantees and profit margin, then you are right. I suspect the pricing of individual elements would be commercially sensitive though and not alone would the company not be obliged to divulge this, but it would actually be imprudent to do so!


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## Duke of Marmalade (26 Sep 2013)

DerKaiser said:


> Those two points are not internally consistent
> 
> 
> Why? Swaptions are liquid assets. Trading costs do not vary much from bonds.
> ...


I am sure this has got so boring for other contributors that we are alone here and nobody is listening.  Anyway I still think it is fun.

Swaptions are wasting assets like all insurance.  We hope they waste away entirely and the insurance does not kick in.  Thus we give up a bit of the growth in the outcomes which do not trigger the insurance for the comfort of that safety net. I think we both agree that the insurance does not come with no downside, you implied that it was only a deduction from scenarios which are showing strong capital gains, I am simply pointing out that there is the same deduction for all scenarios which do not actually trigger the insurance.

Yes, swaptions reduce volatility somewhat  just as insurance somewhat dampens the volatility of earnings for a corporation.  But if the dampening of volatility is in any way significant you finish up with the equivalent of cash.  Just as if a corporation sought insurance against any volatility in its earnings it too would finish up looking like a deposit.

I am not asking for the granular disclosure you suggest.  But I am confronting any impression which may be being conveyed, inadvertently or not, that swaptions are win-win.  IMHO a fund with 78% in sovereign bonds is quite conservative enough, given the 75bp fee drag, without strangling it altogether with swaptions.


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## DerKaiser (26 Sep 2013)

True, no one else listening I suspect!

You are right that there's no free lunch anywhere - guarantees cost money. Also you cannot create a fund with the risk profile of cash but the return of riskier bond portfolios.

On the face of it, sovereign bonds are very conservative. A fund like this, however, could lose 10-20% value over a period of time in which these sovereign bond yields returned to historic norms.


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## Duke of Marmalade (26 Sep 2013)

DerKaiser said:


> True, no one else listening I suspect!
> 
> You are right that there's no free lunch anywhere - guarantees cost money. Also you cannot create a fund with the risk profile of cash but the return of riskier bond portfolios.
> 
> On the face of it, sovereign bonds are very conservative. A fund like this, however, could lose 10-20% value over a period of time in which these sovereign bond yields returned to historic norms.


Okay _Derkaiser_ I think on that note we can spare AAM contributors any further boredom, enjoyed 

BTW if you want to "come out" and disclose your true identity on a one to one basis PM me and I will reciprocate or if you don't trust me I will trust you to reciprocate if you ask me to go first 

I feel sure we must know each other.


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## DerKaiser (26 Sep 2013)

Duke of Marmalade said:


> BTW if you want to "come out" and disclose your true identity


Never!!!


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## LDFerguson (26 Sep 2013)

You're both mistaken.  I was listening intently.  

Oh and by the way, DerKaiser's identity is


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