The kind of innovation we could do without

With interest rates looking likely to staylower for longer, one commentator in thepapers this week said that investors willneed to keep looking for "innovation" inproducts if they want to beat inflation.

However, the very word "innovation"makes us nervous at MoneyWeek, so let'slook at two innovative new offerings forretail investors. Are they any good?

First, the Football Talent Fund, anoffshore fund set up by one-time Englandmanager Terry Venables. It's designed tofinance the development of young footballplayers across the world. The plan is toraise £5m to pay for the training of theplayers, as well as a share in a Portugueseclub, which will act as a feeder club toleagues around the world.

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And the returns? The fund predictsinvestors will make 12% a year, accordingto The Mail on Sunday. The moneywill be generated by taking a cut of the"agency rights" of all the players whomove through the Portuguese club.

This will include a slice of transferfees, marketing income and a player'sfuture earnings. This sounds like a niceidea and it is clearlyinnovative. But it is alsoslightly bonkers.

It isn't regulated. It issuper-expensive theongoing charges willcome in at 3% plus,says Darius McDermottof Chelsea FinancialServices. And the returnsare entirely dependenton the ability of a fewformer football playersto choose and train a fewnew ones.McDermott says he wouldn't touch it with abargepole. Nor would we.

The second product allows you to buyyour very own room in a care home torent out, says Richard Dyson in TheDaily Telegraph. Hand over £70,000 andyou could own a room in the Calderdalecare home, which is currently underdevelopment. The room comes with aguaranteed £7,000 annual income.

Betterstill, the developer promises to buy theunit back from you after ten years for£87,500. This sounds like an innovativeway to get into a market that can onlygrow. But it's actually very dangerous. AsDyson points out, this kind of unitisedproperty investment has what one mightpolitely call a "patchy" record of success.

Returns get eaten away by overpricedmanagement contracts; the guaranteedreturns are small compensation for theoverpricing of the asset; and there is oftenno secondary market for investors to sellinto.

Finally, there is the promise to buyyour unit back. If inflation runs at 2%a year on average for the next ten years,£87,500 will just about make you even ininflation-adjusted terms. If inflation is anyhigher, you will have lost money in realterms. We wouldn't touch this one with abargepole either.