Gilliat launches range accrual property product
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Gilliat Financial Services growth builder series one is a structured product that provides a positive return in rising and falling property markets.
The product is linked to the performance of the FTSE Epra Nareit Developed Europe Index for a term of six years. Returns are based on the number of times during the term that the index trades within a set range of 45 per cent below and 45 per cent above the initial value on a weekly basis.
This accrual strategy means that growth builds if the index stays within the range and will stop accruing if the index moves outside the range. Moving outside the range does not reduce the returns that have already built up and growth starts accruing again when the index moves back within the range.
The final growth payment at the end of the investment term is the sum of all the growth built up on a weekly basis, capped at 51 per cent of the original investment.
Investors will also receive a full capital return provided the index does not fall by more than 45 per cent by the final day of the term. If the index breaches the barrier, capital will reduce by 1 per cent for every 1 per cent fall in the index.
Gilliat says that products based on index performance within a set range allow investors to make a positive return whatever the direction of property markets.
It says the product has been back-tested for every six-year period since the start of the index in 1989 and that the protection barrier has never been breached. Gilliat’s back-testing also showed that in 92.54 per cent of cases, the final return would have been more than 20 per cent. A return of greater than 10 per cent would have been achieved in all the six-year periods.
Some advisers may feel there is a gap in the market for a bull and bear type structured product linked to property, but Gilliat’s chosen index may be unfamiliar to many investors. Some may also find the product’s accrual strategy is too complicated.
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