Walker Crips Structured Investments has unveiled the fourth issue of the defensive dual index (kick-out) plan.
This structured product is linked to the performance of the FTSE 100 and S&P 500 indices. It provides investors with 8 per cent growth plus their original capital at the end of year one provided both indices are at or above their initial values.
If this condition for early maturity is not met, the plan will roll over to the following year, when 16 per cent growth will be payable on the same basis. The plan will pay 24 per cent at the end of year three, 32 per cent at the end of year four, 40 per cent at the end of year five or 48 per cent at the end of the term on the same basis.
If the conditions for early maturity are met, investors will still receive their original capital at the end of the term provided one or both indices do not fall by more than 50 per cent by the final day of the term. If this safety net is breached, 1 per cent of the original capital will be lost for every 1 per cent fall in the worst performing index.
As at August 17, 2011, Incapital Europe and Gilliat Financial Solutions offered similar six-year dual index plans on a kick-out basis. Incapital Europe’s product has the potential to kick-out at six-month intervals, so may not provide the best comparison.
Gilliat’s annual kick-out September 2011 plan offers a choice of annual kick-out reference levels. It can mature if the indices are at or above 100 per cent, 95 per cent or 90 per cent of their initial values. Its 100 per cent option provides the best comparison for the Walker Crips product and the potential returns are higher at 11 per cent plus capital in year one, 22 per cent in year two and so on.
However, the capital protection requirements are more onerous than the Walker Crips product because the levels of the indices are observed daily.