SocGen 10 Year Multi Asset Tracker

Does managing a pension portfolio confuse and agitate you? Worried by all the choice, confused by the asset classes, panicky that you’re just not in the financial asset allocation loop? The answer may be at hand – and no, it’s not a sedative or some form of ketamine.

Step forward instead a really obscure structured product certificate from SocGen called SG10 or the 10 Year Multi Asset Tracker. Basically it’s DIY asset allocation made simple for the confused investor.

Here’s how it works.

Launched last summer to the doyens of the private wealth market, it invests in a wide range of markets and asset classes via structured products – the exact mix for this year is in the table below. 12% for instance goes into a FTSE 100 tracker (maybe the Lyxor product?) while 30% for instance is invested in a global bond index (the wonderfully acronym encrusted SSGWGBI Index).

All in all there are 11 asset classes, including hedge funds, and you get 100% of the return from holding this mix of indices, with annual rebalancing but with no additional fund manager charges. Oh yes, and if you hold the product for the full 10 year term, you get £1000 in capital back even if the final mix of classes has fallen. Call it asset allocation for dummies on the cheap.

The downside – and yes, there’s always a downside – is that like all structured products you don’t get the dividend income from holding the index which with bonds is fairly substantial plus there’s a 1.5% bid/offer spread when you buy the shares.

Still for many investors those disadvantages might be worth it , especially when you consider the fact that you get all the hard work of asset allocation done for you relatively cheaply. But the key is whether the mix makes sense – SocGen have tried to answer this in a backward-looking way by examining returns over the past few years which produced compound annual returns of between 4.25 and 6.3%.

At first sight these may seem a bit low but bear in mind the cautious, absolute returns based nature of the mix – there’s a lot of bonds and hedge funds that pay out a bit over cash. These asset classes also haven’t done very well in the last year which also helps explain why the product is currently down 10% on the year but the key is to compare this with other absolute return products with a heavy mix of bonds and hedge funds.

Summary

The 10 Year Multi-Asset tracker is a product worth exploring if you want a cautious approach to investing over the next ten years – but one to avoid, if, like me, you’re much more aggressive about equity investing and think that shares are worth the risk.