Discovery Invest – Classic Flexible Investment Plan

Discovery Invest’s newly launched Classic Flexible Investment Plan offers investors a built-in 10% upfront booster feature which helps protect their investment from poor relative performance over the long term.

“Our analysis shows that investors typically base their future investment decisions on past performance, however, these decisions are often not the correct ones” says Craig Sher, Head of Discovery Invest Product Development. “Our Classic Flexible Investment Plan offers investors protection from fund underperformance over a five year time period, in the form of an upfront Protector Fund of up to 10% of their investment amount. This upfront boost grows each year and pays out if the fund the investor chose is not in the top quartile of all funds in its sector over five years.”

This protection facility can play a key role in minimising the impact of fund underperformance, which can be seriously damaging the longer the investment time horizon. Over a five year period, underperformance can become material, so the protector facility helps to significantly lift the return of an investment. It can even have the effect of moving an investor’s return into another quartile, for example, from 3^rd quartile ranking up into the 2^nd quartile of performance for that fund’s particular sector.

The Classic Flexible Investment Plan is a lump sum investment product, offering this built-in performance protection feature, being the Classic Performance Protector Fund. At time of plan inception, Discovery Invest will allocate an additional upfront amount to the investor, which is used to boost performance after five years if need be. This initial allocation is equivalent to 10% of the original capital investment for qualifying Discovery Funds; and 7.5% for external funds. It then grows at a guaranteed rate of 6% a year. After five years, a portion of this fund will pay out, depending on how the specific investment has performed relative to its sector. Any remaining amounts left over will be payable to clients at the end of 10 years. The size of the payouts may be impacted if clients withdraw or change their investment options.

Sher also highlights the highly competitive fee structure of the Classic Flexible Investment Plan - there are no initial administration fees payable to Discovery on the upfront capital investment; and in respect of ongoing administration fees, there is no charge on Discovery funds and a very low 0,4% plus VAT on external funds. An ongoing protector premium of 0.57% per annum applies for the performance protection component of this plan. Even though the product offers full flexibility and liquidity, an early exit fee of 2.75% plus vat is payable in the first three years for clients who disinvest early. Thereafter there are no exit fees at all.

The minimum lump sum investment for the Classic Flexible Investment Plan is R100 000.

For investors not wanting the 10% Classic Performance Protector Fund facility, Discovery Invest also offers investors the Essential Flexible Investment Plan with no initial or annual fees on Discovery Funds and the same low 0.4% plus vat per annum on external funds. The protector premium does not apply - however the early exit fee applies within the first three years. The minimum investment amount is R60 000.

In addition, for clients who require full flexibility and liquidity, Discovery also provides the Core Flexible Investment Plan with no initial fees, or early exit fees and annual fees of 0.35% plus vat on Discovery Funds and 0.55% plus vat on external funds.

The overall result is that the Classic and Essential options result in Discovery Invest being the most cost effective platform in the country for clients with at least a three to five year investment horizon, whilst the Core Plan fee structure is competitive with the market.