Four new funds have been launched with an eye toward meeting the needs of investors seeking low-risk alternatives.
AIG Sun America Asset Management Corp. announced the creation of The High Watermark Funds series, a group of three funds that offers protection of initial investments and a lock-in of the highest net asset value achieved during the life of the funds.
To reap the benefits of the funds, investors must remain invested to the funds' maturity dates, which are 2010, 2015 and 2020. Like other principal protection investments, the High Watermark Funds' allocations will become more conservative as the maturity date approaches.
The funds use a proprietary system that dynamically allocates assets on a continuous basis to S&P 500 Index Futures, non-callable U.S. Government Securities and high-grade money market instruments, according to AIG Sun America.
"The use of index futures to achieve equity exposure avoids security selection risk while the fixed income holdings, which typically have a low correlation to equity, enable us to provide value protection," says Juan Ocampo, president of Trajectory Asset Management LLC, which has developed the proprietary methodology.
Fidelity Investments, meanwhile, is tackling the low-risk investment market with the launch of the Fidelity Advisor Ultra-Short Bond Fund. The company says the fund will give investors the potential to obtain a greater total return than a money market fund with less risk to principal than a longer duration bond fund.
The fund will normally invest at least 80% of assets in investment-grade debt securities of all types and repurchase agreements for those securities, according to fund manager Andrew J. Dudley. The fund will maintain a dollar-weighted average maturity of two years or less, and it has the potential for some share-price volatility, he says. It will be managed to have a similar overall interest-rate risk to the Lehman Brothers 6 Month Swap Index.