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Gerrard weights exposure

Gerrard Investment Management has teamed up with structured product provider Woolwich Plan Managers to offer IFAs a structured product which has weighted exposure to four stockmarket indices depending on performance.

The protected hindsight plan is a six-year product linked to the FTSE 100, Dow Jones Eurostoxx 50, S&P 500 and Nikkei 225 indices. After six years investors will receive a full capital return regardless of the performance of the underlying indices. They will also get 40 per cent of any growth in best performing index, 30 per cent of the growth in the second best performing index, 20 per cent of the growth in the third performing index and 10 per cent of the growth in the worst performing index.

To calculate the returns the closing level of each index is recorded on December 2, 2005 and compared with an average produced over the final year of the term. From this, the final return is calculated by adding up the weighting percentages and multiplying this by the value of the amount invested.

This product is innovative compared with many of the vanilla flavour structured products that are linked only to the FTSE 100 index, but is not unique. It builds on the same concept as Woolwichs own cherry picker product from 2004 and a similar product launched at the same time from West LB.

One of the good features of this product is, as the name suggests, the returns are calculated using the benefit of hindsight, Unlike products which are weighted equally to more than one index, investors will have more exposure to the best index and limited exposure to the worst performer after the event. This limits the extent to which the poor performers will drag down the overall returns.

However, this product may be too complicated for some investors due to the combination of indices and the fact that different weightings are applied to them when the final return is calculated.

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