Unit-Linked Funds

What are unit-linked funds?

Unit-linked funds are fund structures linked to life or pension plans issued by an insurance company. The fund structure allows investors to combine their money with other plan holders to create a ‘pooled’ fund.

Different from typical pooled funds, such as Open-Ended Investment Companies (OEICs) and unit trusts, an investor buys a share of the fund itself in the form of units, instead of buying underlying securities such as bonds or shares.

Unit-linked fund structures can include share classes, fund of funds, segregated funds, single asset funds, multi-asset funds, with profit funds, and guaranteed funds. Each has their own benefits depending on variable preferences such as fees, asset types, length of investment and risk appetite.

The number of units an investor owns in a unit-linked fund depends on how much is invested and the price of the units at the time of purchase. From a performance perspective, each investor shares the profits/losses of the assets held within the unit-linked fund.

Why are unit-linked funds important to insurers?

By pooling investments, unit-linked funds offer a cost-effective way for investors to invest in a wide choice of assets and investment strategies. Investors have flexibility to easily change investment strategy and can diversify their risk due to the different asset types within the unit-linked fund itself.

Additionally, since the introduction of the new Solvency regime in Europe, these structures are less capital intensive than traditional life insurance products and can often be less sensitive to changes in interest rates.

How does Clearwater Analytics help?

Clearwater provides a multi-basis, multi-currency, and multi-asset class end-to-end platform that stays up to date on the latest regulatory guidance and does much of the heavy lifting for our clients when it comes to managing the investment lifecycle.

This solution enables investors to manage their positions and cash, control risk, and provide transparency to clients of all sizes and complexity. It supports conventional NAV calculations daily, complete with audit-level validations, to provide NAV and mandate oversight, with controls down to the individual asset owner level.

• Transparency through a single pane of glass for your investment teams and your clients, with access to real-time, consolidated and centralized fund composition, cash, and securities positions.
• Reduce efforts and improve cost efficiency by eliminating manual processes with automated and streamlined business processes aligned to your fund structures that manage data and calculations, ensuring each asset is accounted for and managed, building the valuation, accounting, pricing, and transaction from the ground up. Real-time management of positions and exposures, to view the investor’s allocation in the pool at any time, with considerations for subscriptions and redemptions.
• Powerful web and cloud-based technology provides scalable growth and transparency, giving you and your clients access to everything you need, anytime, anywhere.

Learn more about how Clearwater Analytics can help with unit-linked funds by scheduling time to speak directly to an expert.