I was interested to read the article “Bond investors need a 'market miracle'” (MM, June 20). Clearly, all investors are rightly sensitive as a result of the huge drop in world stockmarkets but I would make the following observations:
Eurolife does not give financial advice. In addition, we go to great lengths to explain all aspects of the investment within our brochures. We recommend people seek professional independent advice and only market our plans via IFAs as we believe this type of investment should be matched to the client's risk profile.
It seems to be the norm when looking at structured products to focus solely on the capital loss incurred without taking into account either the income or growth elements – why? We believe in order to compare structured plans with other investments it is essential to look at the overall “return” rather than just the capital position.
We recently had a FTSE 100 Pep plan mature. This was mentioned in the Chartwell report, which stated that investors lost 18 per cent of their capital. Whilst this is correct, with the growth element of 26 per cent added the overall return was 8 per cent. We believe that this compares favourably with a direct investment in the FTSE through a tracker fund, where the investor would have lost at least 10 per cent over the same time period.
The plan referred to in the article matures in April 2004. We believe to say “it is on course for a 67 per cent loss” ignores guaranteed growth/ income – as well as any future increase in equity markets.
The losses referred to are not unique to the structured investment market. The current market conditions affect all equity-based investments.
We are as concerned as our investors regarding the losses that have and could occur in the future on some structured products. It is with this in mind we feel it is essential to improve the understanding of structured investments and welcome the input of the regulators, IFAs, investors and, of course, Money Marketing in helping us achieve this goal.
If you could assist us in getting the returns aspect put on to a level playing field that would be a good start. In the meantime, let us hope that current depressed state of the stockmarkets soon lifts.
Director, Eurolife Fund Managers, London