New provider considers structured portfolio to fill gap in market

Protean Investments, the newly launched structured investment provider, is considering whether to offer structured funds to investors, according to its co-founders.

Clive Moore and Mike Egerton see a potential gap in the market for a structured fund which sells covered call options on an index of stocks that it holds.

Such strategies sell stock options to generate an extra return and hold the relevant stocks in case the buyers of the options wish to exercise them. (article continues below)

The fund would be a passively managed, structured version of the type of strategy deployed by the actively managed Schroder Income Maximiser fund, for example.

“We will probably be doing something in a fund wrapper looking at income optimisation,” the founders say.

“The covered call approach is quite attractive and works, but it’s surprising nobody has done it in a low-cost passive way.”

Moore and Egerton say the disadvantage of structured funds is “they’re expensive and don’t get any funding benefit”, or the benefit of depositing investors’ money with a bank and receiving an automatic 3% a year in interest.

By contrast, Moore and Egerton say just launching a Ucits fund comes with an upfront 0.3% cost.

Protean’s first offering was a gilt-backed product for wealth managers and institutions that delivers returns above inflation or the return on the FTSE 100 if the stockmarket index falls below a certain level.

The co-founders confirmed the product can function as a complementary investment for clients who are comfortable with investing in the FTSE 100 over the long term to deliver returns above inflation.

Clients can choose to roll over their investment into the FTSE 100 or a similar investment once the product matures if the FTSE breaches its ­barriers.