Advisor Offers Portfolio Insurance
February 15, 1999
A Connecticut registered investment advisor is offering a product that sounds like an investor's dream come true - insurance for a mutual fund portfolio that guarantees that a living investor will not lose his initial investment.
Robert Mann, president of Advisor's Capital Management, a money management business in Woodstock, Ct., began offering the insurance in November. The insurance is provided by Cumberland Casualty & Surety Co. of Tampa, Fla.
"I like it because I can feel good about my job," said Mann, who owns another money management firm besides Capital Management and two broker/dealers, including PacVest Associates, also of Woodstock. Mann has been an investment advisor since 1976 and his money management companies have a total of $240 million under management.
Advisor's Capital Management is offering the insurance in what it calls its, "Ulysses" program. That denotes "fearless investing," says Mann. Ulysses, also known as Odysseus, is the heroic figure in The Odyssey, an epic poem by Homer set in ancient Greece about a brave mortal facing daunting struggles on his way home to Ithaca after the siege of Troy. Mann plans eventually to change the name, Advisor's Capital Investments, to Ulysses Investments.
Mann pays the cost of the insurance- one percent of the principal of the account annually - to the insurance company. Customers pay no more than they would if their portfolios were not insured.
The insurance policy is for a continuous five-year period. After five years, the investor is guaranteed his principal.
But investors have the option, without incurring penalties, to lock in gains each year- on the anniversary date of their contributions or whenever the account's value rises by ten percent or more -by canceling the policy. The investor then may, if he chooses, enter into another five-year policy. If at the end of the five-year-period the investor has lost money, he will receive his original investment. Variable annuity accounts can also be insured.
Investors can also withdraw up to ten percent of the principal annually without canceling the policy.
Mann calls the insurance feature of the Ulysses program, MarketShield. He also has a proprietary computer program that he calls MarketRadar, that helps him anticipate movements in the market and to manage money, he says. MarketRadar is also part of the Ulysses program. Investors are allowed to pick from nine investment strategies that the software can use as guidelines - from aggressive to conservative - for overseeing mutual fund portfolios. Cumberland has approved the MarketRadar software and the nine strategies, and it is largely Cumberland's confidence in the software that has led it to insure the funds, says Mann.
Mann says there are other advisers who have investment insurance programs but none exactly like his. Companies like SunAmerica and Prudential offer mutual fund investors a death benefit option that preserves gains for beneficiaries. Prudential's program for example, is called PruTector and was introduced in August, 1998. SunAmerica's death benefit guarantee was introduced in February, 1998. Neither, however, make guarantees of either principal or gains for living investors. Officials at the Investment Company Institute were not aware of Mann's program nor any like it.
Mann is marketing the program through brokers and he is trying to entice experienced brokers to join his brokerage to sell his program. He has sent out 6,600 flyers to wirehouse brokers to that end. He hopes to accumulate $2 billion under management in the Ulysses program within a year and a half.
"We think it's going to be very big," Mann said.