Prudential launches two new target return funds

Prudential has launched two new Target Return funds, designed to provide inflation-beating returns (CPI plus four per cent and six per cent respectively) over the medium-term by investing in a wide range of asset classes. The pooled parent fund to these new funds achieved a 10.2 per cent per annum annualised return from March 2005 to 31 March 2008.

The Funds:

The Prudential Diversified Growth Fund and the Prudential Defensive Fund invest in an unconstrained and diversified mix of assets - UK and overseas equities, alternative assets, property, bonds and cash. The funds' targets are to provide returns of six per cent and four per cent above the rate of inflation (CPI) over a rolling five year period respectively.

Martyn Bogira, Director of Defined Contribution Solutions at Prudential said: "Around ninety per cent of scheme members automatically go into equity tracker default funds which may not necessarily suit their individual risk profile and investment needs. We believe that investing in more diverse funds rather than being wholly dependent upon the equity markets will more closely match our customers' risk profiles and reduce overall volatility of investment returns. The benefits of increased diversity will ensure that scheme members have access to sectors that offer better relative value at any one particular time."

Asset Allocation is integral to Prudential's management of the two funds. This is an approach that Prudential has refined over many years. It is dramatically different from that employed by many other managers, who do not view asset allocation as a separate discipline and therefore, it is seen by them to be less important in the determination of the asset mix.

Martin Brookes, Manager of both the Prudential Diversified Growth and Prudential Defensive Funds said: "We strongly believe in running funds based on three founding principles - the importance of asset allocation, the benefits of diversification, and the focus on the long term. This process is not new to us and this approach has been at the core of our beliefs for many years. We operate on the basis of complete flexibility and we are not constrained by benchmarks in managing these new funds."

With the addition of the new funds, Prudential has doubled the number of Target Return funds available to its pension customers.