Citigroup has entered the structured product market with the enhanced growth plan.
This capital-protected bond gives investors a choice of two options linked either to the UK market through the FTSE 100 index or the global market through the Dow Jones Global Titans Index,
Option one offers 110 per cent of any rise in the FTSE 100 index over a five-year term plus a full capital return regardless of index performance. However, this option has an early maturity feature which will be triggered in the third year if the index has rise by at least 30 per cent. If this happens, investors will get 33 per cent growth plus their original capital
Option two offers 150 per cent of any rise in the Dow Jones Global Titans index There will be a full capital return unless the index falls by more than 40 per cent and does not recover to at least its initial value by the end of the term. If this safety net is breached, investors capital will be reduced by 1 per cent for every 1 per cent fall in the index below its starting value.
Like option one, option two has an early maturity feature in year three. This is triggered if the index has risen by at least 30 per cent. If it has, investors will come away with 45 per cent growth plus their original capital in full.
With both options, if the product runs full term, the final return is calculated using averaging during the last 12 months of the term.
This product distinguishes itself from other products in this competitive field through its Dow Jones Global Titans option. Other providers that offer exposure to global markets, such as Bristol & West, do so through more than one index.
While several indices offers diversity, the problem is that one index may bring down the returns of the others through averaging. However, Citigroup's global exposure is riskier than the type of product Bristol & West offer in that investor's capital is put at risk.