Savers and investors have a huge range of pooled funds to choose from, nearly all of them channeled through life insurance and pension companies. Generally speaking, the life companies leave it to brokers and financial advisors to explain what the various funds are all about, writes Chris Sparks. 

Now Zurich Life is endeavouring to direct novice investors through the funds maze with a 44-page booklet called The Funds Guide. The publication starts off by reminding individuals that the number one decision they have to make before investing is their appetite for risk. There are explanations about what a fund is, active management and passive management, and the different types of asset classes that funds invest in.

What’s novel about the guide is that Zurich then lists its 54 available funds, with a brief description for each one. All the funds are allocated a risk rating from 1 (very low risk) to 6 (high risk), and there’s information too on which funds are open to PRSAs. After this homework, savers and investors can narrow down their options and seek out more detailed information about individual funds.

One of the interesting Zurich funds in the high risk category is the Indexed Top Tech 100 fund. This fund has delivered an average annual pre-charges gain of 21.2% over the past ten years. Among the niche funds in the Zurich portfolio, this passive fund is relatively popular, with a fund value of €67m. Investors are attracted by that historical performance and year-to-date improvement of 25.6%.

Zurich investment managers don’t run the Indexed TopTech 100 fund. They direct customer funds into the Invesco QQQ Exchange Traded Fund, which is linked to a monster US fund that invests its resources in companies that make up the Nasdaq-100 Index. The index includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq stock market.

In Association with

As of end December 2018, the underlying Invesco QQQ Trust had total funds invested of $74 billion. QQQ goes where the market goes, so it owns $7.4bn worth of Microsoft shares, $9.2bn in Apple share and $8.2bn worth of Amazon shares. When the share prices of these companies go up, so does the Trust valuation, and the ETF, and by extension the fund marketed in Ireland by Zurich.

As Zurich cautions, the Indexed TopTech 100 fund is at the top of their risk rating. The company’s new brochure explains: “If you are a ‘high risk’ investor, you are likely to aim for high possible returns and accept higher levels of risk, recognising that the value of your investment may fluctuate very sharply, particularly over the short term.”

Binary Clampdown

Meanwhile, even grown-up high risk investors find they are being protected from their own folly by the Central Bank, which has taken some risk off the table for retail investors by banning the sale of binary options and restricting the sale of contracts for difference (CFDs).

Central Bank research covering CFD transactions over a two year period found that three out of four retail clients lost money, with an average loss of €2,700. The regulator didn’t reveal the average gain for the minority on the right side of their CFD trade. 

Regulator Derville Rowland said: “Binary options are a fundamentally flawed product. They are no more an investment than betting on a horse. With CFDs, we want to stop firms using incentives to entice retail investors to trade in these short-term, speculative products."