This product was designed to provide investors with a return above their original capital in both rising and falling markets. It is linked to the FTSE 100 index for a term of six years. If the index rises over the term, investors will receive 100 per cent of this growth while if it falls investors will receive a return equivalent to this fall, capped at 40 per cent. This is 5 per cent less than the previous issue in September, and 10 per cent less than was offered in June.
Investors will receive only their original capital back in two circumstances – if the final index level is the same as the starting level, or if there is a barrier breech, where the index falls by more than 40 per cent but does not recover to at least its starting level by the end of the term.
The bull and bear concept could be regarded as the equivalent of an each way bet and may have appeal for cautious investors who are not sure about the direction of the stockmarket over the next six years.
The Arc product is, according to the Structured Retail Products adviser website, one of two bull and bear products available. The other is Abbey’s capital guaranteed triple security bond, which is another FTSE 100 linked bond with a six-year term.
The Abbey product provides 100 per cent of the growth in the index or 100 per cent of the fall in the index, but differs from the Arc product in that a cap is not imposed on the level of returns.. The barrier breech level is also higher at 50 per cent.