Imperial Life Assurance Co. and Desjardins-Laurentian Life Assurance have launched a hedge fund with a 100% capital guarantee. The Index Plus Tactic is a non-registered term investment (3, 51/2 or 8 years), whose capital is guaranteed upon maturity or death.

The companies say that the hedge fund presents a volatility equivalent to that of a bond fund, and has potential for capital growth even when markets are down.

Offered in the form of a GIC, the hedge fund guarantees that 100% of the capital will be refunded at maturity. As well, it offers this same 100% capital guarantee on the death of the investor, if it occurs before maturity.

“With an initial deposit of as little as $500, all investors can have access to a type of investment usually reserved for institutional investors or very wealthy clients. Index Plus Tactic is characterized by the diversification of its investment strategies and, as the asset allocation advisor, Opvest ensures continuous monitoring,” says the fund’s architect Jacques Lussier, vice president of financial engineering at Opvest, a subsidiary of the Mouvement des caisses Desjardins.

The value of Index Plus Tactic is based on variations in the U.S. exchange rate, short-term, interest rates and the return of an alternative strategy fund portfolio.

The hedge fund is part of the Strategic Index Plus family launched in 1998. Managed by 80 or so hedge fund managers selected by Opvest, SIP has regularly bucked stock market trends and compares favourably to the main market indicators.

According to Opvest, the SIP issue of April 1998 (81/2-year term) posted a total return of 24% for the period from April 1998 to June 2001. During this time, the TSE 100 and the S&P 500 indexes posted returns of 4.2% and 10.1% respectively.

The Index Plus Tactic hedge fund has a higher target return than SIP and an annual target volatility of 5% (compared to 3% for SIP). Some 25 to 30 managers are responsible the hedge fund, under the supervision of Opvest. The firm says that the numerous managers diversifies risk and greatly reduce volatility.

The income generated by the hedge is considered to be income accumulated from a pension and not interest income from Canadian source. As such, it is eligible for the $1,000 pension income credit for those aged 65 or older. A $10,000 investment that produces a return of 10% will result in no taxes having to be paid for taxpayers who are eligible for the pension credit.

The fund is available through an extensive distribution network of Imperial Managing General Agents, as well as Laurentian Financial Services and Services financiers La Laurentienne networks across Canada, and on the Finactive site www.finactive.com.