Understanding mirror funds

What is a mirror fund?

Friends Provident International Limited (“FPIL”) operates a range of funds known as 'mirror funds'. The concept is simple: agreements have been set up with investment houses worldwide allowing us to link to specially selected underlying funds chosen on the basis of performance and investment expertise. For each fund link that we arrange with the investment houses, FPIL has set up its own mirror fund which invests solely in the underlying fund, apart from a proportionately small amount which is usually held as a cash balance.

Any changes that happen to the underlying funds will therefore impact our mirror funds. That’s why in our communications to policyholders and their advisers, if we are informing them about a change to a mirror we will refer to 'the changes of the underlying fund' impacting our mirror fund.

How do they work?

Our policyholders invest their premiums into one of our unit-linked investment policies. Then, according to the policyholders’ chosen mirror funds, we invest these premiums (pooled with other unit-linked policyholders) in the underlying fund assets of the mirror fund.

The price of the mirror funds will be different from the underlying fund. This is due to the fact that the mirror fund is launched on a different date from the underlying fund and often at a different starting price. But the movement in the unit price should move broadly in line with the underlying fund.

Units in the mirror funds are normally bought and sold using the ‘bid’ (selling) price. However, some legacy products do contain a bid/offer spread – please refer to the individual product brochures for details.

To cater for all investor attitudes and savings goals, the mirror fund range contains a variety of fund types, across different sectors and geographical regions. It also offers different levels of risk, from currency/money market funds, to managed funds, to higher risk equity funds. Each mirror fund has been given a risk/reward profile rating between 1 and 5 as a guide to the level of risk associated with it, 1 being low risk (such as cash type funds) and 5 being high risk (equity funds such as single country equity).

Supporting information and tools

To help you support your clients in monitoring the funds they are invested in, as well as research future fund options, we provide an interactive fund performance monitoring and research tool, called the Fund centre, which is available free to both you and your clients, and provides access to view the short and long term performance of each mirror fund, download fund factsheets, compare up to five funds side by side and carry out simple charting of one or more funds.

For new investors, our Beginners Guide to Investing brochure provides some helpful information on what to consider before starting on their investment journey.

Important notes

Please note that there are fees for mirror funds that would in turn affect the return on your client's policies. These fees are built into the published unit price of each FPIL mirror fund and therefore will not be seen as a separate deduction from the policy. For further details, please refer to the relevant product literature.

The FPIL mirror funds are intended for medium to long-term investment and can only be accessed using FPIL’s unit-linked investment policies. These policies are also intended for medium to long-term investment and are not therefore designed for early surrender. There may also be restrictions on the amount of withdrawals available from a policy and you should refer to the relevant Principal Brochure for more information.

FPIL is the absolute legal and beneficial owner of all the assets which relate to each mirror fund.

It is important to remember that, as with most investments, the value of investments is not guaranteed and can go down as well as up. Therefore we suggest that you inform your clients that they should only invests money that can be committed in the medium to long term. They should also be informed that securities held within a mirror fund may not be denominated in the currency of that mirror fund, so unit prices may fall purely on account of exchange rate fluctuations.