View more on these topics

Citi structures Ucits III Oeic

iti says IFAs have been though a lot this year, with the demise of various structured product plan managers, concerns about counterparty risk in structured products, changes in regulation and having to prepare for the implementation of the Retail Distribution Review. The company says there are elements of funds and structured products that address the issues. It decided to combine the two within the UK autocall fund, so that it offers the potential for pre-defined returns within an open-ended, Ucits III regulation framework.

An autocall strategy refers to a product that has an early maturity, or kick-out feature. Citi’s fund has a five-year term that is dependent on the index being at or above its initial value at the end of years two, three four or five. Investors will receive predefined returns of 18.5, 27.75, 37 or 46.25 per cent respectively if the index performance meets this condition. As the fund is open-ended, the proceeds will be re-invested for another five-year cycle on new terms.

The fund also provides a degree of capital protection, with a full capital return payable on maturity provided the closing level of the index does not fall by more than 50 per cent during the term. If it breaches the protection barrier, investors will lose 1 per cent of their capital for every 1 per cent fall in the index.

The fund is also fully collateralised by G7 sovereign debt, which is intended to address the concerns IFA may have about counterparty risk.

Morgan Stanley, Scottish Widows and Aviva Investors offer FTSE 100-linked capital-protected Oeics bit none provides an early kick-out feature within an Oeic structure. The latest tranches of the Scottish Widows, Morgan Stanley and Aviva Investors products have fixed terms of six years, three years and three years respectively.

Recommended

London broker loses FSA permission

The FSA has removed the approval of London mortgage broker Olayinka Oladipupo for not being fit and proper to run an authorised firm. It has cancelled the permission of Trinity Network Services Limited where Oladipupo was sole principal and controller.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment