Download Opportunities for Medium to Long-Term Capital

Opportunities
for Medium to
Long-Term Capital
Investing a company’s capital
Many companies are potentially
'cash rich' but with interest rates
at historic lows, should directors
and their advisers be looking for
investments which offer better
returns over the medium to long
term (5-10 years or more).
Investing in a multi-asset
investment fund could be an
option worth considering.
Given the low interest rate environment
we are currently in, many businesses could
be looking at alternatives to investments
where funds are simply held on deposit.
It makes sense for companies to have
working capital readily accessible and
normally the company bank account is the
sensible place to deposit funds. However,
if they have more on deposit than they
need, is it working hard enough for them?
Considerations for determining where
best to invest company capital:
> the likely timeframe of the investment
and the returns looking to be achieved
> the level of working capital required
and the degree to which other
investments should be considered to
meet your business’ longer term needs.
Longer term considerations could include:
> Retirement planning – funding pension
plans for you and any employees
> Future liabilities – replacing staff
who retire, updating equipment or
moving premises.
If you have deposits in excess of working
capital needs, and you are aware of
long-term needs at specific dates in the
future, there are a number of possible
investments you could use.
Deposit accounts do not put your capital at risk, but an investment does.
Deposit accounts allow easy access and an investment doesn't.
PruFund – a potential long-term investment solution
Prudential's range of PruFund funds offer potential advantages of multi-asset investments with some smoothing of investment returns.
continued overleaf
Our PruFund funds offer:
1. Access to multi-asset fund investments
Multi-asset funds work by spreading your money across a number of different
types of assets. These can include company shares, fixed interest bonds, cash and
property – from both the UK and abroad. By investing in a number of different
assets, the fund manager aims to balance the risk that is being taken. So, if one
asset is falling in value then another may be increasing. Of course, there could be
times when all the assets in the fund are either rising or falling in value depending
on the market conditions at the time.
2. Smoothing process
The aim of the smoothing process is to smooth the extreme ups and downs of the
markets. The smoothing process sets out an Expected Growth Rate for each
PruFund fund and then compares that rate to how each fund is actually performing,
making adjustments where necessary.
Expected Growth Rate (EGR): the EGRs reflect our view of how we think each
PruFund fund will perform over the long term. Each PruFund fund has its own EGR
and investments into a PruFund will normally grow daily by the relevant EGR.
Although we take a long term view, we do review the rates every three months to
allow for any changes, which may mean a change in EGR on a quarterly basis, up or
down. The EGR gives a smoothed return and an element of day-to-day predictability.
The PruFund range of funds is
invested in the Prudential WithProfits Fund. For more information
on the PruFund fund range speak to
your Financial Adviser.
The value of an investment can go
down as well as up and you could
get back less than you invested.
For the range of PruFund funds, what
you receive will depend on the value
of the underlying investments, the
Expected Growth Rates as set by the
Prudential Directors, our charges, the
smoothing process, if there is a
guarantee and when you take your
money out. The guarantee if
applicable, is applied at the end of the
guarantee term specified in your
personal illustration document.
Unit Price Adjustment (UPA): although we use a long term view of performance to
set EGRs, we also have to take into account shorter term performance. On a daily
basis, if the shorter term performance differs too much from our current Expected
Growth Rate, we would have to amend the value of your fund to ensure we are not
returning too much or too little. We call these UPAs and they help to ensure all
investors are treated fairly.
There may be occasions where we have to suspend the smoothing process for one
or more PruFund funds, to protect our With-Profits Fund and the clients invested in
it. We may also suspend the smoothing process if unusually large volumes of
money enter or leave the funds. When this happens, the smoothed price for the
affected fund(s) is set to the unsmoothed price for each day until the smoothing
process is reinstated.
3. Guarantees
Some of our PruFund funds offer guarantees that protect the value of your initial
investment at a set date. These guarantees mean that at the end of the period you
choose, the plan will be worth at least the same as the value at the start. There is a
charge for this, which is payable throughout the period of the guarantee. For more
information, please refer to 'The PruFund Range of Funds: Guarantee options' flyer.
www.pru.co.uk
“Prudential” is a trading name of The Prudential Assurance Company Limited which is registered in England and Wales. This name is also used by other companies in
the Prudential Group. Registered office: Laurence Pountney Hill, London EC4R 0HH. Registered number: 15454. Authorised by the Prudential Regulation Authority and
regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
PRUF10289 05/2017
This means that if you have a specific objective in mind, such as replacing staff who
are retiring, updating equipment or moving premises, you can protect your
investment at a future point in time.