Defaqto on Incapital's Protected Growth Plan – FTSE 100 Series 6
View of Defaqto insight analyst for funds Fraser Donaldson
Donaldson says: “This product is aimed at investors who are looking for a stockmarket linked growth plan, who understand and accept the risks to capital involved, and who are investing as part of a balanced and diversified investment portfolio.
“It will provide a return of the investors full capital together with a fixed return if the final maturity level of the FTSE 100, after averaging, is at or above its starting level at maturity. The minimum return payable will be a fixed return of 20 per cent.
“If the growth of the FTSE 100, after averaging, is greater than 20 per cent of the starting level at maturity, investors will receive a return equal to the growth of the index, after averaging, subject to a maximum return of 50 per cent. If at maturity the level of the index, after averaging, is less than starting level no return is payable.
“A consideration must be made regarding the averaging of the FTSE 100 Index within this plan. It takes place over the last six months of the term and is based on the monthly average of the Index. Averaging can help to smooth potential returns during times of volatility but it may also reduce potential returns it the index performs significantly over the last six months.
“The only risk to be mindful of with this product is with the counterparty. If the counterparty becomes insolvent before the end of the term the original investment will be lost. Santander UK has been rated as AA- by Standard and Poors, A1 by Moody’s and A+ by Fitch.
“This plan will appeal to a number of investors as long as they are willing to accept that their return is capped and not guaranteed. The potential for growth is good and the return of full capital is attractive should the index perform badly. But it is worth remembering that this investment is not invested directly into the FTSE 100, but linked to it so the returns achieved may be higher or lower than the returns or losses that might be achieved from investing directly. The plan provides exposure to the price performance versions of the index and there is no participation in dividends linked to the stocks that comprise the index. “