under the spotlight/CLOSE WORLD ESCALATOR FUND
The product: Close World Escalator Fund.

The deal: The fund is a unit trust that tracks a range of overseas stock market indices. The weighting is Europe, 22 per cent; Japan, Far East and Australasia, 26 per cent; North America 52 per cent. The investment is held in cash, together with futures and options contracts.

The options mean that in any one quarter the maximum exposure to any market fall is 5 per cent of funds invested. The remaining 95 per cent of your money is protected against losses. Any gains are locked in at the end of each quarter and roll over into the next one.

The minimum investment is pounds 1,000, or regular monthly payments of pounds 100. Charges include a 5.5 per cent bid/offer spread, discounted to 4 per cent until 14 November. Financial advisers may rebate further commission. Annual management charges are 1.25 per cent.

Plus points: Many investors may feel the need for some "downside" protection. With this fund, losses would be limited to 5 per cent a quarter. The no- exit limit means that if stock markets are rising, gains can be locked in and left to roll over for another quarter. Close Fund Management claims that applying its lock-in to 1987 market conditions would have produced a 14 per cent gain for the fund.

Drawbacks and risks: There is still a potential annual downside of 20 per cent. Although most of a market's upside is "captured", the sharper it is, the less will be locked in. You should be clear you know what you are doing before investing in this fund.

Points out of five: 3.5.

- Nic Cicutti